Louis Navellier's "Little Book That Makes You Rich" distills growth investing into eight fundamental rules, from positive earnings revisions to high return on equity, on the premise that stocks with accelerating fundamentals tend to outperform once Wall Street updates its estimates. The strategy favors companies that consistently beat expectations, grow sales and earnings at a rapid clip, expand margins, and generate real cash flow, all while maintaining a healthy balance sheet. One name currently clearing every hurdle in that screen is CAREDX INC (NASDAQ:CDNA).
Passing all eight rules
CareDx, a transplant diagnostics company, checks each of the eight criteria that the Navellier methodology requires. The current readings are notably strong across the board:
- Positive earnings revisions: the consensus EPS estimate for the next quarter has been raised by 23.1% over the past three months, well above the 4% minimum.
- Positive earnings surprises: the company beat analyst estimates in 3 of the last 4 quarters, with an average beat of 62.1%, far exceeding the 10% requirement.
- Increasing sales growth: revenue grew 34.4% year over year on a trailing twelve month basis and 52.2% when comparing the latest quarter to the prior year quarter, both above the 20% thresholds.
- Expanding operating margin: operating margin growth over the past year stands at 268.0%, a dramatic improvement over the 2% filter used in the screen.
- Strong cash flow: free cash flow growth over the past year reached 476.7%, comfortably above the 15% requirement.
- Earnings growth: EPS increased 117.6% year over year on a TTM basis and 270.0% quarter over quarter, versus the required 15% on each measure.
- Positive earnings momentum: current quarter over quarter EPS growth of 270.0% compares with a decline of 60.0% in the same quarter a year ago, showing clear acceleration.
- High return on equity: ROE is 26.1%, well above the 10% minimum Navellier recommends.
What the fundamental report shows
The broader fundamental picture supports the screen results. CareDx receives an overall fundamental rating of 7 out of 10, with particularly strong marks for financial health and growth. The balance sheet is notably clean, with no outstanding debt, an Altman-Z score of 16.09, and a current ratio of 4.58. Profitability metrics are also solid, with a return on invested capital of 19.97%, a return on assets of 20.83%, and operating margins that rank near the top of the biotechnology industry.
Growth is the standout feature. Revenue has expanded at an average annual rate of 14.6% over recent years, while EPS growth has averaged 21.8% annually. Forward estimates point to continued acceleration, with EPS expected to grow at nearly 37.9% per year going forward. That combination of strong historical performance and positive revisions is exactly what the Little Book methodology looks for in a growth candidate.
Investors who want to review the complete fundamental breakdown can open the CareDx analysis report.
Why these criteria matter for the strategy
The logic behind the eight rules is that each filter identifies a different dimension of fundamental strength, and together they describe a company that is not merely growing, but compounding its advantages. Positive earnings revisions and surprises signal that sell-side estimates are catching up with reality, which often drives price momentum. Accelerating sales and expanding margins show that growth is both broad and profitable. Strong cash flow gives management the flexibility to reinvest without taking on debt, while a high ROE indicates that shareholder capital is being deployed efficiently.
CareDx is relevant to this strategy because it exhibits all of these traits simultaneously. The company operates in transplant diagnostics, a niche where demand for its testing services is growing, and the recent operating margin expansion suggests the business is scaling profitably. The lack of debt and strong liquidity also mean the growth story is not reliant on external financing, which reduces balance sheet risk.
Risks and limitations
The screen is not without caveats. CareDx trades at a trailing price to earnings ratio of 47.2 and a forward multiple of 51.5, which is expensive in absolute terms, though the low PEG ratio and expected earnings growth provide some justification. The company also posted negative earnings in 4 of the past 5 years, so the current profitability is relatively recent and may not yet be proven across a full cycle. In addition, the screen relies on short-term fundamental ratios, so investors should monitor whether the growth parameters hold up over coming quarters rather than assuming the trend is permanent.
Cross-checks from other screens
CareDx also appears on other scans that add context beyond the eight-rule checklist.
- The CAN SLIM Stocks screen selects stocks with powerful earnings and sales growth plus market leadership, and it flags CDNA for combining high-growth momentum with technical leadership. View the CAN SLIM screen
- The Strong Momentum Stocks screen shows CDNA with strong recent price action and a confirmed uptrend, a natural complement to the fundamental story. Check the strong momentum screen
Together, these checks suggest the growth setup is showing up beyond a single fundamental screen.
A starting point for growth investors
For investors who want to apply the Little Book methodology on a broader basis, the screen that surfaced CareDx is designed as a flexible starting point. Navellier himself notes that the weight of each rule can shift with market conditions, so it is worth reviewing the list regularly and combining it with careful manual analysis. Those looking for other stocks that currently match this approach can browse the latest screen results.
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 »
View the Zacks #1 Rank List
CareDx (NASDAQ:CDNA) Shows Strong Growth Fundamentals by Passing All Eight Rules of Navellier's Screen
Louis Navellier's "Little Book That Makes You Rich" distills growth investing into eight fundamental rules, from positive earnings revisions to high return on equity, on the premise that stocks with accelerating fundamentals tend to outperform once Wall Street updates its estimates. The strategy favors companies that consistently beat expectations, grow sales and earnings at a rapid clip, expand margins, and generate real cash flow, all while maintaining a healthy balance sheet. One name currently clearing every hurdle in that screen is CAREDX INC (NASDAQ:CDNA).
Passing all eight rules
CareDx, a transplant diagnostics company, checks each of the eight criteria that the Navellier methodology requires. The current readings are notably strong across the board:
What the fundamental report shows
The broader fundamental picture supports the screen results. CareDx receives an overall fundamental rating of 7 out of 10, with particularly strong marks for financial health and growth. The balance sheet is notably clean, with no outstanding debt, an Altman-Z score of 16.09, and a current ratio of 4.58. Profitability metrics are also solid, with a return on invested capital of 19.97%, a return on assets of 20.83%, and operating margins that rank near the top of the biotechnology industry.
Growth is the standout feature. Revenue has expanded at an average annual rate of 14.6% over recent years, while EPS growth has averaged 21.8% annually. Forward estimates point to continued acceleration, with EPS expected to grow at nearly 37.9% per year going forward. That combination of strong historical performance and positive revisions is exactly what the Little Book methodology looks for in a growth candidate.
Investors who want to review the complete fundamental breakdown can open the CareDx analysis report.
Why these criteria matter for the strategy
The logic behind the eight rules is that each filter identifies a different dimension of fundamental strength, and together they describe a company that is not merely growing, but compounding its advantages. Positive earnings revisions and surprises signal that sell-side estimates are catching up with reality, which often drives price momentum. Accelerating sales and expanding margins show that growth is both broad and profitable. Strong cash flow gives management the flexibility to reinvest without taking on debt, while a high ROE indicates that shareholder capital is being deployed efficiently.
CareDx is relevant to this strategy because it exhibits all of these traits simultaneously. The company operates in transplant diagnostics, a niche where demand for its testing services is growing, and the recent operating margin expansion suggests the business is scaling profitably. The lack of debt and strong liquidity also mean the growth story is not reliant on external financing, which reduces balance sheet risk.
Risks and limitations
The screen is not without caveats. CareDx trades at a trailing price to earnings ratio of 47.2 and a forward multiple of 51.5, which is expensive in absolute terms, though the low PEG ratio and expected earnings growth provide some justification. The company also posted negative earnings in 4 of the past 5 years, so the current profitability is relatively recent and may not yet be proven across a full cycle. In addition, the screen relies on short-term fundamental ratios, so investors should monitor whether the growth parameters hold up over coming quarters rather than assuming the trend is permanent.
Cross-checks from other screens
CareDx also appears on other scans that add context beyond the eight-rule checklist.
Together, these checks suggest the growth setup is showing up beyond a single fundamental screen.
A starting point for growth investors
For investors who want to apply the Little Book methodology on a broader basis, the screen that surfaced CareDx is designed as a flexible starting point. Navellier himself notes that the weight of each rule can shift with market conditions, so it is worth reviewing the list regularly and combining it with careful manual analysis. Those looking for other stocks that currently match this approach can browse the latest screen results.
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 »