Today’s Daily Alert bring a new recommendation from Validea Hot List.
“Luxembourg-based Altisource Portfolio Solutions S.A. (ASPS) provides real estate mortgage portfolio management and related technology products, as well as asset recovery and customer relationship management services. ... It has a $1.5-billion market cap, and has increased earnings per share in each of the past six years. ... Strategy: Small-Cap Growth Investor based on Motley Fool.
“This methodology seeks companies with a minimum trailing-12-month after tax profit margin of 7%. The companies that pass this criterion have strong positions within their respective industries and offer greater shareholder returns. A true test of the quality of a company is that they can sustain this margin. ASPS’s profit margin of 18.76% passes this test.
“The investor must look at the relative strength of the company in question. Companies whose relative strength is 90 or above (that is, the company outperforms 90% or more of the market for the past year), are considered attractive. Companies whose price has been rising much quicker than the market tend to keep rising. ASPS, with a relative strength of 95, satisfies this test.
“Companies must demonstrate both revenue and net income growth of at least 25% as compared to the prior year. These growth rates give you the dynamic companies that you are looking for. These rates for ASPS (78.95% for EPS, and 56.84% for Sales) are good enough to pass. ...
“ASPS’s profit margin has been consistent or even increasing over the past three years (Current year: 16.78%, Last year: 16.35%, Two years ago: 12.81%), passing the requirement. It is a sign of good management and a healthy and competitive enterprise. ...
The Fool Ratio: P/E to Growth
“The ‘Fool Ratio’ is an extremely important aspect of this analysis. If the company has attractive fundamentals and its Fool Ratio is 0.5 or less (ASPS’s is 0.25), the shares are looked upon favorably. These high quality companies can often wind up as the biggest winners. ASPS passes this test.”
- John Reese, Validea Hot List, June 8, 2012