17 Stocks With High Potential For Big Growth (2024)

The Oberweis Octagon stock-picking strategy focuses on small and mid-sized firms that meet eight criteria for value, growth and momentum. For the patient investor with the ability to withstand the higher short-term volatility and risk of small- and mid-cap stocks, there is the potential for strong long-term returns.

As of May 28, AAII’sOberweis Octagonscreening model hasan annual gain since inception (1998) of 12.7%, versus9.0% for the S&P SmallCap 600 index and 9.4% for the S&P MidCap 400 index in the same period.

Investing in Small Companies Using the Oberweis Octagon Screen

The AAII Oberweis Octagon strategy seeks rapidly growing small to mid-size companies trading at attractive prices—a process that Oberweis Asset Management, an independent investment management firm, terms “AGARP:” aggressive growth at a reasonable price. The AAII Oberweis screening strategy integrates value, growth and momentum factors stemming from eight points that make up the Oberweis Octagon including:

  • Rapid annual growth in revenue (sales)
  • Rapid annual growth in pretax income
  • “Favorable” recent (quarterly) trends in revenue and earnings growth, ideally showing acceleration
  • Low price-earnings ratio in relation to underlying growth rate
  • Low price-to-sales ratio
  • Strong price strength relative to the market
  • Products or services that offer the potential for strong future growth
  • Review of company financial statements, especially the footnotes, to attempt to identify future problems

Small Companies

The Oberweis Octagon screen seeks to identify and capitalize on pricing inefficiencies involving small to mid-size companies experiencing rapid growth. The Oberweis approach begins by limiting the universe of stocks to exchange-listed micro-, small- and mid-cap companies. Exchanges have listing requirements that establish minimums for company size, share availability and financial strength.

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The AAII Oberweis screen focuses on “small” companies with market capitalization (stock price multiplied by number of shares outstanding) under $1 billion and “medium-sized” companies between $1 billion and $8 billion in market cap. There are specific criteria applied to these two groups of companies.

By focusing on smaller companies, the Oberweis approach is attempting to find companies with a greater potential for high growth. No company can sustain a high growth rate indefinitely—eventually its size begins to weigh it down. Large companies simply cannot sustain the high growth rates that smaller, fast-growing companies can.

It is important to point out that there are unique risks to investing in small companies. Some of these risks include limited product lines, markets and financial resources. Furthermore, the stocks of small companies tend to be more thinly traded than the stocks of larger, more established companies. Therefore, the prices of these stocks can be subject to sudden and significant movements.

Growth in Revenues and Earnings

Rapid and consistent growth, specifically in revenues and earnings, stands as the cornerstone of the Oberweis Octagon approach. Sales are important because they drive bottom-line growth (earnings), and because sales tend to be more difficult to manage or manipulate than earnings. The AAII Oberweis screen seeks small companies with a market cap below $1 billion to have growth rates in sales and pretax income over the last 12 months of at least 30%, while requiring medium-sized companies with a market cap between $1 billion and $8 billion to be growing sales and pretax income at a rate of at least 20% over this same period.

Early Earnings Acceleration

One of the goals of the Oberweis Octagon strategy is to identify rapidly growing companies in the early stages of their life cycles which, in turn, will generate excess long-term returns.

The screening criteria focusing on “favorable” trends in earnings and sales require that both sales and earnings per share from continuing operations for the last fiscal quarter be greater than they were for the same quarter one year prior. Furthermore, sales and earnings from the prior fiscal quarter must also be greater than they were for the same quarter one year prior.

Looking at the annual results for a company, the screen also requires that sales and earnings per share from continuing operations for the last four quarters (12 months) be greater than they were for the last fiscal year.

Value Elements: Low Relative Price-Earnings Ratio and Low Price-to-Sales Ratio

Identifying rapidly growing companies with prospects for continued growth in the future is only part of the Oberweis stock selection methodology. From the universe of aggressively growing companies, the strategy seeks out those that are reasonably priced. Specifically, the AAII Oberweis screen looks at stock market valuations—especially the price-earnings and price-to-sales ratios.

To isolate reasonably priced companies from the universe of rapidly growing firms, the Oberweis Octagon screening methodology makes use of a modified PEG ratio that compares the price-earnings ratio to the projected growth rate in earnings for the next year, which is the percentage change of forecasted earnings for the current fiscal year compared to the level of reported earnings for the last fiscal year.

For smaller companies, the Oberweis screen requires the price-earnings ratio to be less than the estimated growth rate in earnings per share, while for medium-sized companies the price-earnings ratio cannot exceed the projected one-year growth rate in earnings per share.

The other value element of the Oberweis approach considers the price-to-sales ratio. This ratio compares the current stock price to the sales of a company. The Oberweis Octagon methodology considers companies with reasonable price-to-sales ratios based on the company’s underlying growth prospects and profit margins. For this screen, a company’s price-to-sales ratio is compared to that of its industry. The screen requires that the current price-to-sales ratio be less than the median value of the price-to-sales ratio for the respective industry.

Strong Price Strength Relative to the Market

Research confirms the benefit of seeking out stocks with high relative strength, especially when combined with other fundamental selection characteristics, such as size and value. Momentum is not merely for short-term traders and those who rely on technical analysis, but also for those who focus on fundamental analysis.

Price momentum is normally measured by comparing the price change of a stock over a specified period relative to a benchmark, such as the S&P 500 index, or against a segment of stocks; the resulting number is called relative strength.

The Oberweis approach looks for companies that have outperformed at least 75% of the other stocks in the market over the last 12 months. Therefore, the Oberweis screen requires a company to have a 52-week relative strength figure that ranks in the top 25% of stocks.

Future Growth Potential

While the AAII Oberweis Octagon stock selection process is relatively “mechanical,” Oberweis Asset Management incorporates two additional elements into its selection process that are subjective in nature. The AAII Oberweis approach does not consider these subjective elements in its screen.

One of these subjective elements involves identifying the future growth potential of a company—specifically, focusing on companies with products or services that offer the potential for “substantial” future growth. This element can be thought of as a company possessing a durable competitive advantage over its competitors that allows it to protect its market share and profitability.

Another way in which the Oberweis methodology looks to the future is through careful examination of a company’s financial statements. Specifically, Oberweis Asset Management reviews a company’s quarterly and annual reports filed with the U.S. Securities and Exchange Commission (SEC), paying close attention to the footnotes that accompany these filings to attempt to identify future problems or threats.

The footnotes serve to augment the information provided in the financial statements and contain supplemental data and disclosures. Footnotes provide information about the accounting methods used as well as management’s underlying assumptions and estimates. Disclosures found in the footnotes typically relate to areas such as fixed assets, inventories, pension and other post-employment benefit plans, lawsuits and other contingencies, marketable securities and other investments and significant customers and sales to related parties.

The AAII Oberweis screen cannot assess these two elements via a mechanical screen. This point underscores the need for additional analysis once you have applied any type of mechanical screen to a universe of stocks.

Stocks Passing the Oberweis Octagon Screen (Ranked by 52-Week Relative Strength)

___

The stocks meeting the criteria of the approach do not represent a “recommended” or “buy” list. It is important to perform due diligence.

If you want an edge throughout this market volatility, become an AAII member.

17 Stocks With High Potential For Big Growth (2024)

FAQs

17 Stocks With High Potential For Big Growth? ›

Look for companies that are experiencing an acceleration in the growth of sales, revenue, and earnings over consecutive quarters. Try to identify increasing sales growth connected to market breakthroughs or the start of a new management team's tenure.

Which stock has the most growth potential? ›

10 Best Growth Stocks to Buy for 2024
StockImplied upside from April 25 close*
Tesla Inc. (TSLA)23.4%
Mastercard Inc. (MA)19%
Salesforce Inc. (CRM)20.8%
Advanced Micro Devices Inc. (AMD)30.1%
6 more rows
Apr 26, 2024

Which stocks to buy for high growth? ›

Which are the top growth stocks in India right now?
  • #1 ZOMATO.
  • #2 ADANI GREEN ENERGY.
  • #3 L&T INFOTECH.
  • #4 TRENT.
  • #5 ADANI ENTERPRISES.

How do you find a stock with high growth potential? ›

Look for companies that are experiencing an acceleration in the growth of sales, revenue, and earnings over consecutive quarters. Try to identify increasing sales growth connected to market breakthroughs or the start of a new management team's tenure.

Which type of stock has a greater growth potential? ›

Common stock tends to offer higher potential returns, but more volatility. Preferred stock may be less volatile but have a lower potential for returns.

What stocks will skyrocket in 2024? ›

2024's 10 Best-Performing Stocks
Stock2024 return through March 31
MicroStrategy Inc. (MSTR)169.9%
SoundHound AI Inc. (SOUN)177.8%
Vera Therapeutics Inc. (VERA)180.4%
Avidity Biosciences Inc. (RNA)182%
6 more rows
Apr 1, 2024

Which stock will double in one month? ›

Stocks with good 1 month returns
S.No.NameCMP Rs.
1.CG Power & Indu.641.95
2.Hindustan Zinc564.00
3.Marico590.85
4.Apar Inds.8118.55
23 more rows

What are the 10 best growth stocks? ›

See the 10 stocks

The Motley Fool has positions in and recommends Alphabet, Amazon, Chewy, Fiverr International, Fortinet, Nvidia, PayPal, Salesforce, and Uber Technologies.

Which top 5 shares to buy? ›

Stocks to Buy Today
STOCKACTIONTRADE PRICE
MSTCLTDBUY844
LTBUY3380
INDIGOBUY4148
JINDALSTELBUY979
1 more row

What are the top 10 stocks to buy for long term? ›

Top 10 Stocks to Buy for Long Term
  • Reliance Industries Limited. Tata Consultancy Services. ...
  • Reliance Industries Limited (RIL) ...
  • Tata Consultancy Services (TCS) ...
  • Infosys Limited. ...
  • HDFC Bank. ...
  • ITC Limited. ...
  • Hindustan Unilever Limited. ...
  • Asian Paints.
7 days ago

What is the fastest growing stock right now? ›

Best-performing growth stocks
CompanyPerformance (Year)
Celsius Holdings Inc111.67%
Uber Technologies Inc110.36%
Vital Farms Inc109.35%
Royal Caribbean Group107.05%
17 more rows
May 1, 2024

What is the most aggressive stock? ›

6 High-Risk Stocks for Aggressive Investors
  • Yum China Holdings Inc. (ticker: YUMC)
  • Albemarle Corp. (ALB)
  • Walgreens Boots Alliance Inc. (WBA)
  • Ubiquiti Inc. (UI)
  • Chewy Inc. (CHWY)
  • Concentrix Corp. (CNXC)
Apr 30, 2024

What stock will grow the most in 5 years? ›

(NYSE:UBER) as one of the best growth stocks to invest in.
  • Elastic N.V. (NYSE:ESTC) P/E Ratio: 214.81. Quarterly Revenue Growth: 19.45% ...
  • CrowdStrike Holdings, Inc. (NASDAQ:CRWD) ...
  • Shopify Inc. (NYSE:SHOP) ...
  • Vertiv Holdings Co (NYSE:VRT) P/E Ratio: 67.30. ...
  • Mercadolibre, Inc. (NASDAQ:MELI) ...
  • ServiceNow, Inc. (NYSE:NOW)
Apr 25, 2024

What are the best value stocks to buy right now? ›

Comparison Results
NamePricePrice Change
GM General Motors$45.03$0.14 (0.31%) After 0.07%
IBM International Business Machines$167.36$0.2 (0.12%) After 0.14%
PFE Pfizer$28.38$0.06 (0.21%) After 0.18%
ABBV AbbVie$161.59$0.31 (0.19%) After 0.32%
5 more rows

Which investment has the highest potential return? ›

Key Takeaways
  • The U.S. stock market is considered to offer the highest investment returns over time.
  • Higher returns, however, come with higher risk.
  • Stock prices typically are more volatile than bond prices.
  • Stock prices over shorter time periods are more volatile than stock prices over longer time periods.

Which penny stocks to buy now? ›

Penny Stock Screener
NamePriceAnalyst Consensus
MGNX MacroGenics$3.316 Buy 4 Hold 0 Sell Moderate Buy
WISA WiSA Technologies, Inc.$3.18
CTMX CytomX Therapeutics$1.983 Buy 3 Hold 0 Sell Moderate Buy
AEMD Aethlon Medical$1.181 Buy 1 Hold 0 Sell Moderate Buy
30 more rows

What stock will grow the most in 10 years? ›

9 Best Growth Stocks for the Next 10 Years
  • DaVita Inc. ( ticker: DVA)
  • DraftKings Inc. ( DKNG)
  • Extra Space Storage Inc. ( EXR)
  • First Solar Inc. ( FSLR)
  • Gen Digital Inc. ( GEN)
  • Microsoft Corp. ( MSFT)
  • Nvidia Corp. ( NVDA)
  • SoFi Technologies Inc. ( SOFI)
Mar 27, 2024

What stocks are a strong buy right now? ›

Sign up for Kiplinger's Free E-Newsletters
Company (ticker)Analysts' consensus recommendation scoreAnalysts' consensus recommendation
Delta Air Lines (DAL)1.40Strong Buy
ServiceNow (NOW)1.41Strong Buy
GE Aerospace (GE)1.41Strong Buy
Lamb Weston (LW)1.42Strong Buy
21 more rows

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