Buffettology: Sustainable Growth Screen

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Performance

Passing Companies

Screening Criteria

Chart

Buffettology:

Sustainable

Growth

S&P 500

YTD Return: -5.6% -3.6%

Five Year Return: 23.8% 16.6%

Ten Year Return: 11.1% 4.7%

Inception: 11.5% 3.9%

Data as of 1/31/2014 The Buffettology: Sustainable Growth Screen represents AAII's interpretation of the investment

approach and is not determined by the original strategist. The list of passing companies

represents a hypothetical portfolio, which is used to track the screens performance on a chart.

Like most successful stockpickers, Warren Buffett thinks that the efficient market theory is

absolute rubbish. Buffett has backed up his beliefs with a successful track record through

Berkshire Hathaway, his publicly traded holding company.

Buffett is often identified with Benjamin Graham, with whom he studied, worked under, and

maintained a long friendship. However, his own investment experience has led him to adopt the

approaches of other investment pioneers, as well, in particular Philip Fisher's focus on the

importance of a business's growth prospects and management. [For more on Benjamin Graham,

see AAII's Graham--Defensive Investor (Non-Utility), Graham--Defensive Investor (Utility) and

Graham--Enterprising Investor screens. For more on Philip Fisher, see AAII's Fisher (Philip)

screen.]

Buffett has never expounded extensively on his investment approach, although it can be gleaned

from his writings and explanations of holdings in the Berkshire Hathaway annual reports.

Outsiders, however, have attempted to put together explanations of his investment style. One

recently published book that discusses his approach in an interesting and methodical fashion is

"Buffettology: The Previously Unexplained Techniques That Have Made Warren Buffett the

World's Most Famous Investor," by Mary Buffett, a former daughter-in-law of Buffett's, and

David Clark, a family friend and portfolio manager [the book is published by Simon & Schuster,

800-223-2336; $27.00]. This book was used as the basis for screen.

Table 1 below provides a summary of Buffett's investment style.

Table 1. The Warren Buffett Approach

Philosophy and Style

Investment in stocks based on their intrinsic value, where value is measured by the ability to

generate earnings and dividends over the years. Buffett targets successful businesses-those

with expanding intrinsic values, which he seeks to buy at a price that makes economic sense,

defined as earning an annual rate of return of at least 15% for at least five or 10 years.

Universe of Stocks

No limitation on stock size, but analysis requires that the company has been in existence for a

considerable period of time.

Criteria for Initial Consideration

Consumer monopolies, selling products in which there is no effective competitor, either due

to a patent or brand name or similar intangible that makes the product unique. In addition, he

prefers companies that are in businesses that are relatively easy to understand and analyze,

and that have the ability to adjust their prices for inflation.

Other Factors

A strong upward trend in earnings

Conservative financing

A consistently high return on shareholder's equity

A high level of retained earnings

Low level of spending needed to maintain current operations

Profitable use of retained earnings

Valuing a Stock

Buffett uses several approaches, including:

Determining firm's initial rate of return and its value relative to government bonds:

Earnings per share for the year divided by the long-term government bond interest

rate. The resulting figure is the relative value-the price that would result in an initial

return equal to the return paid on government bonds.

Projecting an annual compounding rate of return based on historical earnings per

share increases: Current earnings per share figure and the average growth in earnings

per share over the past 10 years are used to determine the earnings per share in year

10; this figure is then multiplied by the average high and low price-earnings ratios for

the stock over the past 10 years to provide an estimated price range in year 10. If

dividends are paid, an estimate of the amount of dividends paid over the 10-year

period should also be added to the year 10 prices.

Stock Monitoring and When to Sell

Does not favor diversification; prefers investment in a small number of companies that an

investor can know and understand extensively.

Favors holding for the long term as long as the company remains "excellent"it is consistently growing and has quality management that operates for the benefit of

shareholders. Sell if those circumstances change, or if an alternative investment offers a better

return.

Monopolies vs. Commodities

Warren Buffett seeks first to identify an excellent business and then to acquire the firm if the

price is right. Buffett is a buy-and-hold investor who prefers to hold the stock of a good company

earning 15% year after year over jumping from investment to investment with the hope of a

quick 25% gain. Once a good company is identified and purchased at an attractive price, it is

held for the long-term until the business loses its attractiveness or until a more attractive

alternative investment becomes available.

Buffett seeks businesses whose product or service will be in constant and growing demand. In

his view, businesses can be divided into two basic types:

Commodity-based firms, selling products where price is the single most important factor

determining purchase. Buffett avoids commodity-based firms. They are characterized with high

levels of competition in which the low-cost producer wins because of the freedom to establish

prices. Management is key for the long-term success of these types of firms.

Consumer monopolies, selling products where there is no effective competitor, either due to a

patent or brand name or similar intangible that makes the product or service unique.

While Buffett is considered a value investor, he passes up the stocks of commodity-based firms

even if they can be purchased at a price below the intrinsic value of the firm. An enterprise with

poor inherent economics often remains that way. The stock of a mediocre business treads water.

How do you spot a commodity-based company? Buffett looks for these characteristics:

The firm has low profit margins (net income divided by sales);

The firm has low return on equity (earnings per share divided by book value per share);

Absence of any brand-name loyalty for its products;

The presence of multiple producers;

The existence of substantial excess capacity;

Profits tend to be erratic; and

The firm's profitability depends upon management's ability to optimize the use of

tangible assets.

Buffett seeks out consumer monopolies. These are companies that have managed to create a

product or service that is somehow unique and difficult to reproduce by competitors, either due

to brand-name loyalty, a particular niche that only a limited number companies can enter, or an

unregulated but legal monopoly such as a patent.

Consumer monopolies can be businesses that sell products or services. Buffett reveals three types

of monopolies:

Businesses that make products that wear out fast or are used up quickly and have brand-name

appeal that merchants must carry to attract customers. Nike is a good example of a firm with a

strong brand name demanded by customers. Any store selling athletic shoes must carry Nike

products to remain competitive. Other examples include leading newspapers, drug companies

with patents, and popular brand-name restaurants such as McDonald's.

Communications firms that provide a repetitive service that manufacturers must use to persuade

the public to buy the manufacturer's products. All businesses must advertise their items, and

many of the available media face little competition. These include worldwide advertising

agencies, magazine publishers, newspapers, and telecommunications networks.

Businesses that provide repetitive consumer services that people and businesses are in constant

need of. Examples include tax preparers, insurance companies, and investment firms.

A Screen for Identifying Consumer Monopolies

Mary Buffett suggests going to your local 7-Eleven or White Hen Pantry to identify many of

these "must-have" products. These stores typically carry a very limited line of must-have

products such as Marlboro cigarettes and Wrigley's gum. However, with the guidance of the

factors used to identify attractive companies, we can establish a basic screen to identify potential

investments worthy of further analysis.

Questions to determine the attractiveness of the business

Consumer monopoly or commodity? Buffett seeks out consumer monopolies selling products in which there is no effective

competitor, either due to a patent or brand name or similar intangible that makes the product

unique. Investors can seek these companies by identifying the manufacturers of products that

seem indispensable. Consumer monopolies typically have high profit margins because of their

unique niche; however, simple screens for high margins may simply highlight firms within

industries with traditionally high margins. AAII's Stock Investor Professional is used to perform

the screen. For our screen, we look for companies with operating margins and net profit margins

above their industry norms. The operating margin concerns itself with the costs directly

associated with production of the goods and services, while the net margin takes all of the

company activities and actions into account. Additional screens for strong earnings and high

return on equity will also help to identify consumer monopolies. Follow-up examinations should

include a detailed study of the firm's position in the industry and how it might change over time.

Do you understand how it works? As is common with successful investors, Buffett only invests in companies he can understand.

Individuals should try to invest in areas where they possess some specialized knowledge and can

more effectively judge a company, its industry, and its competitive environment. While it is

difficult to construct a quantitative filter, an investor should be able to identify areas of interest.

An investor should only consider analyzing those firms passing the Buffett screen operating in

areas that they can clearly grasp.

Is the company conservatively financed? Consumer monopolies tend to have strong cash flows, with little need for long-term debt. Buffett

does not object to the use of debt for a good purpose-for example, if a company uses debt to

finance the purchase of another consumer monopoly. However, he does object if the added debt

is used in a way that will produce mediocre results-such as expanding into a commodity line of

business.

We screen for companies with conservative financing by seeking out companies with total

liabilities to assets below the median for their respective industry. Appropriate levels of debt

vary from industry to industry, so it is best to construct a relative filter against industry norms.

The ratio of total liabilities to total assets is more encompassing than just looking at ratios based

upon long-term debt such as the debt-equity ratio.

Are earnings strong and do they show an upward trend? Buffett invests only in a business whose future earnings are predictable to a high degree of

certainty. Companies with predictable earnings have good business economics and produce cash

that can be reinvested or paid out to shareholders. Earnings levels are critical in valuation. As

earnings increase, the stock price will eventually reflect this growth.

Buffett looks for strong long-term growth as well as an indication of an upward trend. In the

book, Mary Buffett looks at both the 10- and five-year growth rates. Stock Investor Professional

contains only seven years of data, so we examine the seven-year growth rate as the long-term

growth rate and the three-year growth rate for the intermediate-term growth rate.

For our screen, we first require that a company's seven-year earnings growth rate be higher than

that of 75% of the stocks in the overall database. Stock Investor Professional includes percentile

ranks for growth rates, so we specify a percentile rank greater than 75.

It is best if the earnings also show an upward trend. Buffett compares the intermediate-term

growth rate to the long-term growth rate and looks for an expanding level. For our next filter, we

require that the three-year growth rate in earnings be greater than the seven-year growth rate.

Consumer monopolies should show both strong and consistent earnings. Wild swings in earnings

are characteristic of commodity businesses. An examination of year-by-year earnings should be

performed as part of the valuation. A screen requiring an increase in earnings for each of the last

seven years would be too stringent and not be in keeping with the Buffett philosophy. However,

a filter requiring positive earnings for each of the last seven years should help to eliminate some

of the commodity-based businesses with wild earnings swings.

Does the company stick with what it knows? Companies that stray too far from their base of operation often end up in trouble. Peter Lynch

also avoided profitable companies diversifying into other areas. Lynch termed these

"diworseifications." Quaker Oats' purchase and subsequent sale of Snapple is a good example of

this common mistake.

A company should invest capital only in those businesses within its area of expertise. This is a

difficult factor to screen for on a quantitative level. Before investing in a company, look at the

company's past pattern of acquisitions and new directions. They should fit within the primary

range of operation for the firm.

Has the company been buying back its shares? Buffett prefers that firms reinvest their earnings within the company, provided that profitable

opportunities exist. When companies have excess cash flow, Buffett favors shareholder-

enhancing maneuvers such as share buybacks. Buffett views share repurchases favorably since

they cause per share earnings increases for those who don't sell, resulting in an increase in the

stock's market price. This is a difficult variable to screen as most data services do not indicate

this variable. You can screen for a decreasing number of outstanding shares, but this factor is

best analyzed during the valuation process. While we did not screen for this factor, a follow-up

examination of a company should reveal if it has a share buyback plan in place.

Have retained earnings been invested well? Buffett examines management's use of retained earnings, looking for management that have

proven it is able to employ retained earnings in the new moneymaking ventures, or for stock

buybacks when they offer a greater return. A company should retain its earnings if its rate of

return on its investment is higher than the investor could earn on his own. Dividends should only

be paid if they would be better employed in other companies. If the earnings are properly

reinvested in the company, earnings should rise over time and stock price valuation will also rise

to reflect the increasing value of the business. Our other screens for strong and consistent

earnings and strong return on equity help to the capture this factor.

An important factor in the desire to reinvest earnings is that the earnings are not subject to

personal income taxes unless they are paid out in the form of dividends. The use of retained

earnings delays personal income taxes until the stock is sold.

Is the company's return on equity above average? Buffett considers it a positive sign when a company is able to earn above-average returns on

equity. Mary Buffett indicates that the average return on equity for over the last 30 years is

approximately 12%. We created a custom field that calculated the average return on equity over

the last seven years. We then filter for companies with average return on equity above 12%. An

average return on equity for the last seven years should provide a better indication of the normal

profitability for the company, then just a current snapshot. However, we also include a screen

requiring that the current return on equity be above 12% to help assure that the past is still

indicative of the future direction of the company.

Is the company free to adjust prices to inflation? True consumer monopolies are able to adjust prices to inflation without the risk of losing

significant unit sales. This factor is best applied through a qualitative examination of the

companies and industries passing all the screens.

Does company need to constantly reinvest in capital? In Buffett's view, the real value of consumer monopolies is in their intangibles-for instance,

brand-name loyalty, regulatory licenses, and patents. They do not have to rely heavily on

investments in land, plant, and equipment, and often produce products that are low tech.

Therefore they tend to have large free cash flows (operating cash flow less dividends and capital

expenditures) and low debt. Retained earnings must first go toward maintaining current

operations at competitive levels. This is a factor that is also best examined at the time of the

company valuation although a screen for relative levels of free cash flow might help to confirm a

company's status.

The Price is Right

The above basic questions help to indicate whether the company is potentially a consumer

monopoly and worthy of further analysis. However, stocks passing the screens are not automatic

buys.

Is the Price Right?

The price that you pay for a stock determines the rate of return-the higher the initial price, the

lower the overall return. The lower the initial price paid, the higher the return. Buffett first picks

the business, and then lets the price of the company determine when to purchase the firm. The

goal is to buy an excellent business at a price that makes business sense. Valuation equates a

company's stock price to a relative benchmark. A $500 dollar per share stock may be cheap,

while a $2 per share stock may be expensive.

Buffett uses a number of different methods to evaluate share price. Three techniques are

highlighted in the book with specific examples.

Buffett prefers to concentrate his investments in a few strong companies that are priced well. He

feels that diversification is performed by investors to protect themselves from their stupidity.

Earnings Yield

Buffett treats earnings per share as the return on his investment, much like how a business owner

views these types of profits. Buffett likes to compute the earnings yield (earnings per share

divided by share price) because it presents a rate of return that can be compared quickly to other

investments.

Buffett goes as far as to view stocks as bonds with variable yields, and their yields equate to the

firm's underlying earnings. The analysis is completely dependent upon the predictability and

stability of the earnings, which explains the emphasis on earnings strength within the preliminary

screens.

Buffett likes to compare the company earnings yield to the long-term government bond yield. An

earnings yield near the government bond yield is considered attractive. The bond interest is cash

in hand but it is static, while the earnings of Nike should grow over time and push the stock price

up.

Historical Earnings Growth

Another approach Buffett uses is to project the annual compound rate of return based on

historical earnings per share increases. For example, take company in which current earnings per

share are $2.77 and earnings per share have increased at a compound annual growth rate of

18.9% over the last seven years. If earnings per share increase for the next 10 years at this same

growth rate of 18.9%, earnings per share in year 10 will be $15.64. [$2.77 * ((1 + 0.189)^10)].

This estimated earnings per share figure can then be multiplied by the company's historical

average price-earnings ratio of 14.0 to provide an estimate of price [$15.64 * 14.0=$218.96]. If

dividends are paid, an estimate of the amount of dividends paid over the 10-year period should

also be added to the year 10 price [$218.96 + $13.32 = $232.28].

Once this future price is estimated, projected rates of return can be determined over the 10-year

period based on the current selling price of the stock. Buffett requires a return of at least 15%.

For our example, comparing the projected total gain of $232.28 to the current price of $48.25

leads projected rate of return of 17.0% [($232.28/$48.25) ^ (1/10) - 1]. Our first table lists the

stocks passing the consumer monopoly screen that have a projected rate of return of 15% based

upon historical earnings growth model.

Sustainable Growth

The third approach detailed in "Buffettology" is based upon the sustainable growth rate model.

Buffett uses the average rate of return on equity and average retention ratio (1 - average payout

ratio) to calculate the sustainable growth rate [ ROE * ( 1 - payout ratio)]. The sustainable

growth rate is used to calculate the book value per share in year 10 [BVPS ((1 + sustainable

growth rate )^10)]. Earnings per share can be estimated in year 10 by multiplying the average

return on equity by the projected book value per share [ROE * BVPS]. To estimate the future

price, you multiply the earnings by the average price-earnings ratio [EPS * P/E]. If dividends are

paid, they can be added to the projected price to compute the total gain.

For example, a company would have a sustainable growth rate of 19.2% if its average ROE was

22.8%, and average payout ratio was 15.9% [22.8% * (1 - 0.159)]. Thus, its current book value

per share of $11.38 should grow at this rate to roughly $65.90 in 10 years [$11.38 * ((1 +

0.192)^10)]. If return on equity remains 22.8% in the tenth year, earnings per share that year

would be $15.03 [ 0.228 * $65.90]. The estimated earnings per share can then be multiplied by

the average price-earnings ratio of 14.0 to project the price of $210.42 [$15.03 * 14.0]. Since

dividends are paid, use an estimate of the amount of dividends paid over the 10-year period to

project the rate of return of 16.5% [(($210.42 + $12.71)/ $48.25) ^ (1/10) - 1].

The final Buffett screen establishes a minimum projected return from the sustainable growth rate

model of 15%. A critical aspect to analysis is determining whether the companies will continue

their past pattern of growth and profitability.

Conclusion

Warren Buffett's approach identifies "excellent" businesses based on the prospects for the

industry and the ability of management to exploit opportunities for the ultimate benefit of

shareholders. He then waits for the share price to reach a level that would provide him with a

desired long-term rate of return. The approach makes use of "folly and discipline": the discipline

of the investor to identify excellent businesses and wait for the folly of the market to buy these

businesses at attractive prices. Most investors have little trouble understanding Buffett's

philosophy. The approach encompasses many widely held investment principles. Its successful

implementation is dependent upon the dedication of the investor to learn and follow the

principles. For individual investors who want to duplicate the process, it requires a considerable

amount of time, effort, and judgment in perusing a firm's financial statements, annual reports,

and other information sources to thoroughly analyze the business and quality of management. It

also requires patience, waiting for the right price once a prospective business has been identified,

and the ability to stick to the approach during times of market volatility. But for individual

investors willing to do the considerable homework involved, the Buffett approach offers a

proven path to investment value.

Sustainable Growth

The current operating margin is greater than or equal to the industry's current median

operating margin

The current net profit margin is greater than or equal to the industry's current median net

profit margin

The total liabilities to total assets ratio for the last fiscal quarter (Q1) is less than or equal

to the industry's median total assets to total liabilities ratio for the same period

The seven-year growth rate in earnings per share from continuing operations ranks in the

top 75% of the entire database (percent rank greater than or equal to 75)

The three-year growth rate in earnings per share from continuing operations is greater

than or equal to the seven-year growth rate in earnings per share from continuing

operations

The earnings per share from continuing operations for the last 12 months and for each of

the last seven years is positive

The current return on equity is greater than 12%

The seven-year average return on equity is greater than 12%

The projected earnings per share growth, using the sustainable growth model, is greater

than or equal to 15%

EPS Growth

The current operating margin is greater than or equal to the industry's current median

operating margin

The current net profit margin is greater than or equal to the industry's current median net

profit margin

The total liabilities to total assets ratio for the last fiscal quarter (Q1) is less than or equal

to the industry's median total liabilities to total assets ratio for the same period

The seven-year growth rate in earnings per share from continuing operations ranks in the

top 75% of the entire database (percent rank greater than or equal to 75)

The three-year growth rate in earnings per share from continuing operations is greater

than or equal to the seven-year growth rate in earnings per share from continuing

operations

The earnings per share from continuing operations for the last 12 months and for each of

the last seven fiscal years is positive

The current return on equity is greater than 12%

The seven-year average return on equity is greater than 12%

The projected 10-year rate of return (calculated using the current price and the projected

price in ten years based on historical earnings growth, projected earnings per share, and

historical average price-earnings ratio) is greater than or equal to 15%

Companies are ranked by Buffett Price Growth-Sust. Growth (d)

Company

name

Tic

ker

Exc

hang

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Pric

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EP

S

Co

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wth

3yr

EP

S

Co

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Gro

wth

7yr

EP

S

Gro

wth

Est

Ret

urn

on

eq

uit

y

12

m

Ret

urn

on

eq

uit

y -

7

yea

r

av

g.

Ear

ning

s

Yiel

d

12m

P

E

PE-

Ave

rage

7

year

s

Buf

fett

Pric

e

Gro

wth

-

EPS

Gr.

Sustai

nable-

Growt

h 7y

Buf

fett

Pric

e

Gro

wth

-

Sust

.

Gr.

Web address

American

Public

Education

, Inc

AP

EI

Nas

daq

42.

33

21.

7

20.

3

15.

96 25

30.

8 6.07

1

6.

5

54.8 35.8 30.8 52.2 http://www.americanpubli

ceducation.com

VMware,

Inc.

V

M

W

New

Yor

k

90.

14

51.

8

36.

3

16.

545

14.

5

26.

2 2.26

4

4.

2

116.

5 50.3 26.2 48.6 http://www.vmware.com/

Potash

Corp./Sas

katchewa

n (USA

PO

T

New

Yor

k

31.

32

29.

3

23.

6 NA

19.

5 32 7.22

1

3.

9

27.7 33.6 28.4 45.1 http://www.potashcorp.co

m

Priceline.c

om Inc

PC

LN

Nas

daq

114

4.8

9

35.

1

28.

7

20.

086

35.

8

36.

1 3.01

3

3.

2

37 30.5 36.1 41.3 http://www.priceline.com

NetEase,

Inc (ADR)

NT

ES

Nas

daq

74.

97

24.

5

22.

1

14.

614

24.

3

32.

9 7.11

1

4.

1

14.2 22.2 31.8 37.3 http://www.163.com

Global

Sources

Ltd.

(Bermuda

)

GS

OL

Nas

daq 6.6

43.

7

19.

7 NA

21.

4

19.

2

16.3

6

6.

1 20.2 35.5 19.2 34.6

http://www.globalsources.

com

Agrium

Inc. (USA)

AG

U

New

Yor

k

87.

1

60.

2

24.

6 NA

18.

6

18.

5

10.1

4

9.

9 37.1 42.7 16.9 34.4 http://www.agrium.com

National-

Oilwell

Varco,

Inc.

NO

V

New

Yor

k

75.

01

125

.8

57.

1

9.5

67

32.

8

26.

1

21.7

6

4.

6 11.1 71.8 24.9 34.3 http://www.nov.com

IPG

Photonics

Corporati

on

IP

GP

Nas

daq

66.

87

188

.4

57.

5 35

19.

2

18.

1 4.37

2

2.

9

58.7 73.5 18.1 30.4 http://www.ipgphotonics.c

om

ClearOne

Incoprora

ted

CL

RO

Nas

daq

9.1

73

288

.4 93 NA

42.

8

17.

1

33.0

3 3 19.8

133.

3 17.1 29.8 http://www.clearone.com/

Hibbett

Sports,

Inc.

HI

BB

Nas

daq

60.

01

34.

6

15.

7 16

37.

5

26.

2 4.65

2

1.

5

22.3 16.3 26.2 27.1 http://www.hibbett.com/

Taro

Pharmace

utical

Industries

TA

RO

New

Yor

k

101

.96

55.

3

22.

4 NA

31.

7

29.

1 6.45

1

5.

5

11.3 18.6 29.1 25.4 http://www.taro.com

Cummins

Inc.

C

MI

New

Yor

k

126

.98

58.

8

15.

8

10.

34 21

25.

4 5.95

1

6.

8

16.6 16.8 21.1 24.8 http://www.cummins.com

Zumiez

Inc.

ZU

MZ

Nas

daq

21.

52

64.

1

15.

5

14.

8

13.

6

14.

2 6.37

1

5.

7

33.9 24.9 14.2 24.8 http://www.zumiez.com/

Oil States

Internatio

nal, Inc.

OI

S

New

Yor

k

93.

95

92.

4

19.

2 -2.2

17.

4

17.

2 6.8

1

4.

7

16.1 20.4 17.2 21.6 http://www.oilstatesintl.co

m

Sierra

Monitor

Corporati

on

SR

M

C

Over

the

coun

ter

2 81.

7

34.

6 NA

15.

6 13 6.5

1

5.

4

37.7 47.5 12.8 21.5 http://www.sierramonitor.c

om

Graham

Corporati

on

GH

M

Ame

rican

35.

71

20.

1

16.

1 18

12.

2

19.

2 3.3

3

0.

3

24.1 13.9 17.7 21.1 http://www.graham-

mfg.com

Estee

Lauder

Companie

s Inc

EL

New

Yor

k

68.

74

29.

5

19.

6

12.

9 31

28.

8 3.77

2

6.

5

25.5 19.9 20.4 20.9 http://www.elcompanies.c

om/Pages/Homepage.aspx

Steven

Madden,

Ltd.

SH

OO

Nas

daq

32.

59

31.

2 31

12.

6

19.

9

20.

6 5.92

1

6.

9

17.1 31.6 19.3 20.7 http://www.stevemadden.c

om

Green

Mountain

Coffee

Roasters

G

M

CR

Nas

daq 81

75.

3

69.

6 15

19.

6

16.

1 3.9

2

5.

6

40.3 78 16.1 20.6 http://www.gmcr.com

Boston

Beer Co

Inc

SA

M

New

Yor

k

208

.31

28.

1

22.

9 NA 27

22.

6 2.01

4

9.

7

35 21.7 22.6 20.5 http://www.bostonbeer.co

m/

Stamps.co

m Inc.

ST

MP

Nas

daq

39.

46

84.

8

26.

6 NA

26.

7

18.

6 5.4

1

8.

5

26.2 31.7 18.6 20.5 http://www.stamps.com

Geospace

Technolog

ies Corp

GE

OS

Nas

daq

79.

52

66.

5 30 NA

26.

2 16 6.75

1

4.

8

32.3 40.6 16 20.4 http://www.oyogeospace.c

om

ExlService

Holdings,

Inc.

EX

LS

Nas

daq

25.

15

33.

5

22.

3 16

12.

5

12.

8 5.29

1

8.

9

34.4 30.1 12.8 20.4 http://www.exlservice.com

/

NIC Inc. EG

OV

Nas

daq

21.

74

22.

1

20.

3

17.

5

46.

6

23.

9 2.39

4

1.

8

39 19.7 23.9 19.8 http://www.egov.com

eBay Inc EB

AY

Nas

daq

53.

2 17

15.

6

14.

533

12.

8

13.

7 4.1

2

4.

4

34.4 19.7 13.7 19.3 http://www.ebay.com/

Liquidity

Services,

Inc.

LQ

DT

Nas

daq

23.

77

32.

4

21.

6

10.

067

14.

2

12.

7 5.3

1

8.

9

31 28.2 12.7 18.4 http://www.liquidityservic

esinc.com/

Portfolio

Recovery

Associates

,

PR

AA

Nas

daq

50.

22

37.

2 18

15.

5

21.

6

18.

2 6.45

1

5.

5

16.4 18.8 18.2 17.8 http://www.portfoliorecov

ery.com

PetSmart,

Inc.

PE

TM

Nas

daq 63

30.

6

15.

7

14.

7

37.

3

22.

9 6.33

1

5.

8

19.2 18.7 19.5 17.7 http://www.petsmart.com/

Ralph

Lauren

Corp

RL

New

Yor

k

156

.89

19.

2

15.

7 9.7 19 18 5

2

0 19.5 16.3 16.5 17

http://www.ralphlauren.co

m

Source: AAII's Stock Investor and Reuters Research, Inc. Data as of

1/31/2014