The opposite thesis
Compounders that can re-rate inside the life of the option.
Not a cheap balance sheet reverting to book, but a business growing fast enough — on trailing and forward revenue, on forward EPS, at a gross margin that shows pricing power — to reprice the stock before the call expires, bought at a growth-adjusted valuation that does not already assume it.
Educational research tooling, not investment advice. A screen is a filter over public data, not a recommendation.
What the LEAP (Growth) screen tests
The opposite thesis to the value screens: not a cheap balance sheet reverting to book, but a business compounding fast enough to rerate the stock inside the life of the option — bought at a growth-adjusted valuation that does not already assume it.
The rules, one by one
Every rule below is applied on every scan and reported with the value it was tested against, pass or fail. Each threshold is yours to change.
- Revenue Growth (TTM)
- Trailing revenue growth year over year. The business has to actually be expanding before leverage on it is worth paying for.
- Forward Revenue Growth
- Consensus revenue growth for the next fiscal year. A LEAP is a bet on the future, so the forward number matters more than the trailing one. A name with no consensus estimate fails rather than passing on the trailing figure.
- Forward EPS Growth
- Consensus EPS growth for the next fiscal year. Ahead of revenue growth it implies operating leverage — margins inflecting, which is what reprices a stock.
- Gross Margin
- Gross profit over revenue. High and rising margins are the clearest quantitative trace of pricing power.
- Quality Gate
- ROIC above the floor and free cash flow positive — waived for companies growing revenue over 30%, where the letter allows an exception for a business whose margins are still inflecting. 1 = passes.
- Net Debt / EBITDA
- Debt less cash over EBITDA. Leverage ahead of you in the stack can destroy the thesis before it plays out. Net-cash companies score 0 rather than 'unknown'.
- PEG
- Forward P/E divided by forward EPS growth. Under 1 the market is charging you less than a point of multiple per point of growth.
- EV/Sales per Growth Point
- EV/Sales divided by forward revenue growth in points. EV/S of 4 at 35% growth is 0.11; EV/S of 10 at 20% is 0.50. The first is far more interesting for a rerating thesis even though both are 'growth stocks'.
- Rule of 40
- Revenue growth plus FCF margin. Above 40% the company is choosing between growth and cash rather than failing at both.
- Dilution
- Change in share count year over year. Positive means new shares are transferring your claim to someone else; negative means buybacks. Based on annual filings, so it lags.
Who this screen is for
- Investors who want the growth side of the book run with the same explicit rules as the value side.
- Anyone who thinks EV/Sales is meaningless without the growth rate next to it.
- Deep-value purists — nothing on this screen will look cheap on book.
- Anyone relying on names without analyst coverage; a company with no consensus estimate fails rather than passing on trailing figures.
LEAP (Growth) FAQ
What is EV/Sales per growth point?
EV/Sales divided by forward revenue growth in points. EV/S of 4 at 35% growth is 0.11; EV/S of 10 at 20% growth is 0.50. The first is far more interesting for a re-rating thesis even though both are 'growth stocks'.
What does the quality gate test?
ROIC above the floor and free cash flow positive — waived for companies growing revenue over 30%, where a business whose margins are still inflecting is allowed the exception.
Why the Rule of 40?
Revenue growth plus free-cash-flow margin. Above 40% the company is choosing between growth and cash rather than failing at both.
Other screens
NCAV
Net current asset value is current assets minus every liability. When it exceeds the market cap, the market is handing you the working capital and charging nothing for the business attached to it. The liquidity and leverage rules exist so that discount survives long enough to close.
Negative EV
Enterprise value is market cap plus debt minus cash. Below zero, the cash net of debt exceeds what the shares cost — you are paid to take the operating company. The price/sales and liquidity rules are there to make sure there is a business attached and that the cash is genuinely available.
Acquirer's Multiple
EV/EBITDA is what an acquirer of the entire business pays for its operating earnings. It is used instead of P/E because it is indifferent to how the company is financed — debt and cash are already in the numerator. The screen adds conservative leverage and a share count that is not growing.
Five scans, no card.
Run LEAP (Growth) over the universe you choose, open any company, and read the rules it passed and the ones it did not.
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