Growth investors who follow the strategy outlined in Louis Navellier's "The Little Book That Makes You Rich" look for stocks with positive estimate revisions, repeated earnings surprises, accelerating sales and earnings, improving margins, and high returns on equity. ADAMAS TRUST INC (NASDAQ:ADAM) is a mortgage real estate investment trust that surfaced when those eight rules were translated into a stock screen, and the latest fundamental data show it passes every one of the book's filters.
The eight rules at a glance
The screening methodology uses eight separate fundamental filters. The company clears all of them based on reported figures:
- Positive earnings revisions: next-quarter EPS estimates have been raised by 6.53% in the past three months, above the 4% requirement.
- Positive earnings surprises: the company beat EPS estimates in 3 of the last 4 quarters, with an average beat of 70.81% versus the 10% minimum.
- Increasing sales growth: trailing twelve-month revenue is up 46.17%, and latest-quarter revenue is up 37.76% from the same quarter last year; both exceed the 20% threshold.
- Expanding operating margin: operating margin growth came in at 225.31% over the past year, well above the 2% minimum.
- Strong cash flow: free cash flow growth over the trailing year is 4,194.68%, far above the 15% filter.
- Earnings growth: EPS is up 721.05% on a trailing twelve-month basis and 1,275% versus the same quarter last year; the screen asks for at least 15% on both.
- Positive earnings momentum: the current quarter's EPS growth of 1,275% is higher than the 86.21% growth recorded four quarters earlier.
- High return on equity: ROE stands at 10.50%, above the 10% minimum and stronger than most of its industry peers.
Why these criteria matter
Each rule is meant to identify a different stage of the growth cycle. Upward estimate revisions and positive earnings surprises are early signals that analysts are becoming more optimistic about future results. Sales and margin expansion show that growth is flowing through to the income statement, while the cash flow filter ensures the company is generating enough capital to fund itself. The momentum condition is important because it separates one-off jumps from sustained acceleration; the most recent quarterly growth rate needs to be higher than the rate reported in the same quarter a year earlier. A stock that clears all of these filters at once is relatively rare, and that is exactly what the Little Book methodology is designed to find.
What the fundamental report shows
On a composite basis, the company earns a fundamental rating of 5 out of 10, with clear strengths and weaknesses. It was compared with 68 industry peers in the mortgage real estate investment trust sector. The report breaks down as follows:
- Growth: 7 out of 10, helped by strong revenue and EPS growth.
- Valuation: 8 out of 10, with a price/earnings ratio of 6.29 and cheap forward earnings and EV/EBITDA multiples relative to the peer group and the broader market.
- Profitability: 6 out of 10, with return on assets, return on equity, and return on invested capital each landing among the better levels in the industry.
- Financial health: 2 out of 10, reflecting high leverage, weak short-term liquidity, and a negative Altman-Z score.
For a more detailed look at how those scores are built and how the company compares with industry peers, view the full fundamental analysis report.
Risks to keep in mind
Passing a growth screen does not remove the need for balance sheet scrutiny, and the financial health score is the main limitation here. The Altman-Z score is -0.62, which places the company in the distress zone, while the current and quick ratios are both 0.05, indicating very limited short-term liquidity. The debt/equity ratio is high at 7.69, which points to meaningful reliance on external financing. Return on invested capital is also below the cost of capital, suggesting the company is not currently creating value on that measure. In addition, the dividend payout ratio is 83.33% of income, leaving a thin cushion if earnings weaken.
Using the screen as a starting point
Navellier's methodology is best treated as a starting point rather than a complete buy signal. The company's strong growth and cheap valuation make it an interesting fit for investors seeking accelerating fundamentals, but the weak financial health rating should be weighed carefully before acting. Investors who want to monitor this strategy across the broader market can run the same filters and compare candidates using the Little Book screen.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice or a recommendation to buy or sell any security. Always conduct your own research and consider your risk tolerance before making investment decisions.
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Adamas Trust (NASDAQ:ADAM) Passes All Eight Growth Filters in Little Book Screen
Growth investors who follow the strategy outlined in Louis Navellier's "The Little Book That Makes You Rich" look for stocks with positive estimate revisions, repeated earnings surprises, accelerating sales and earnings, improving margins, and high returns on equity. ADAMAS TRUST INC (NASDAQ:ADAM) is a mortgage real estate investment trust that surfaced when those eight rules were translated into a stock screen, and the latest fundamental data show it passes every one of the book's filters.
The eight rules at a glance
The screening methodology uses eight separate fundamental filters. The company clears all of them based on reported figures:
Why these criteria matter
Each rule is meant to identify a different stage of the growth cycle. Upward estimate revisions and positive earnings surprises are early signals that analysts are becoming more optimistic about future results. Sales and margin expansion show that growth is flowing through to the income statement, while the cash flow filter ensures the company is generating enough capital to fund itself. The momentum condition is important because it separates one-off jumps from sustained acceleration; the most recent quarterly growth rate needs to be higher than the rate reported in the same quarter a year earlier. A stock that clears all of these filters at once is relatively rare, and that is exactly what the Little Book methodology is designed to find.
What the fundamental report shows
On a composite basis, the company earns a fundamental rating of 5 out of 10, with clear strengths and weaknesses. It was compared with 68 industry peers in the mortgage real estate investment trust sector. The report breaks down as follows:
For a more detailed look at how those scores are built and how the company compares with industry peers, view the full fundamental analysis report.
Risks to keep in mind
Passing a growth screen does not remove the need for balance sheet scrutiny, and the financial health score is the main limitation here. The Altman-Z score is -0.62, which places the company in the distress zone, while the current and quick ratios are both 0.05, indicating very limited short-term liquidity. The debt/equity ratio is high at 7.69, which points to meaningful reliance on external financing. Return on invested capital is also below the cost of capital, suggesting the company is not currently creating value on that measure. In addition, the dividend payout ratio is 83.33% of income, leaving a thin cushion if earnings weaken.
Using the screen as a starting point
Navellier's methodology is best treated as a starting point rather than a complete buy signal. The company's strong growth and cheap valuation make it an interesting fit for investors seeking accelerating fundamentals, but the weak financial health rating should be weighed carefully before acting. Investors who want to monitor this strategy across the broader market can run the same filters and compare candidates using the Little Book screen.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice or a recommendation to buy or sell any security. Always conduct your own research and consider your risk tolerance before making investment decisions.
Read full article here »