Desktop Stock Ticker | 3 Stocks With Fast ‘Organic’ Sales Growth

3 Stocks With Fast ‘Organic’ Sales Growth

Good news, sort of: Third-quarter financial reports, now trickling in, are expected to show that earnings per share for U.S. companies fell 6% from a year earlier. That will mark a sharp improvement from the second quarter’s 18% decline, the first quarter’s 39% plunge and the fourth quarter of 2008, when U.S. companies as a group produced no earnings.

The bad news: Sales for U.S. companies are believed to have fallen 14% in the third quarter. That suggests the improvement (or rather, the slower pace of worsening) is owed to cost-cutting and not growth.

For the uninitiated, a company’s profit-and-loss statement begins with sales (the “top line”) and ends with profits (the “bottom line”), subtracting for various costs in between. The two basic ways to create a larger bottom line are to take out fewer costs and to increase the top line. Both outcomes are usually welcome, but top-line growth is more sustainable than spending cuts because overly frugal companies risk becoming underfunded, just as overzealous dieters can become underfed.

I recently searched for companies that have grown both their sales and profits lately, favoring those with organic sales growth. By “organic,” I don’t mean that sales increases came from hemp socks and soy milk. I mean that they came by adding new customers or charging higher prices, rather than buying their competitors.

Bucyrus International

Milwaukee-based Bucyrus (BUCY) makes mining equipment. As with Joy Global (JOYG), a mining machine maker mentioned here last week in a <a href="http://www.smartmoney.com/investing/<a href="http://www.desktopstock tickertickeronline.com”>stock ticker tickers/3-<a href="http://www.desktopstock tickertickeronline.com”>stock ticker tickers-That-Are-Up-Big-But-Still-Cheap/”>round-up of <a href="http://www.desktopstock tickertickeronline.com”>stock ticker tickers that are up big but that still look cheap, Bucyrus’s order backlog is slow-moving. That means it’s posting healthy sales today based on long-standing orders, but also that sales are expected to decline next year to reflect the past year’s downturn. They might not fall as sharply as expected though. The company has produced above-estimate financial results over the past two quarters, and strong demand for coal and precious metals is sparking new interest in machines. Shares trade below 12 times forecast 2009 earnings.

Aeropostale

Teen clothier Aeropostale (ARO) is easily outperforming its mall peers of late. The company’s sales are expected to climb 17% this year, while Abercrombie & Fitch (ANF) and American Eagle (AEO) are forecast to post a significant decline and a small one, respectively. Analysts credit Aeropostale’s “on-trend” merchandising and lower prices overall, and say teen clothing could be in for a decent holiday season for two reasons. Demand is pent up, with parents having spent relatively little on family clothing over the past year and teens demanding a more frequent fashion refresh than their parents. And with major videogame consoles now several years old, few must-have electronic items are competing with clothes for teen spending this year. Shares of Aeropostale fetch 13 times 2009 earnings.

Rino International

Shares of Rino International (RINO) have climbed 38%, vs. 9% for the S&P 500, since I highlighted them here in <a href="http://www.smartmoney.com/Investing/<a href="http://www.desktopstock tickertickeronline.com”>stock ticker tickers/3-Small-Companies-With-Soaring-Shares/”>an early August look at companies with fast-multiplying share prices. Based an hour from Beijing by plane, the company makes equipment that Chinese iron and steel makers use to remove pollutants from wastewater and exhaust gas. China’s government is using incentives and fines to induce companies to install such equipment. The run-up in Rino’s price suggests caution, but sales are growing quickly and shares look modestly priced relative to most U.S. <a href="http://www.desktopstock tickertickeronline.com”>stock ticker tickers. They sell for less than 13 times forecast 2009 earnings.

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