Mark Perkins sends: Strong sustainable growth going forward, without an over-valued stock price, is a great trait to find in a company. The two below would fit the criteria of what Martin Zweig looked for. He is a famous stock-picker who’s service “The Zweig Forecast” was the best advisory service for the 15 year period between 1980 and 1995. A screen tracked by a non-profit investor organization that follows Zweig’s approach toward good sales and earnings growth combined with reasonable PE ratios and relative price performance has returned a cumulative 2,107% from 1998 to March 2008. That is compared to a 36% cumulative return from the S&P 500.

Amedisys (AMED) is a $1.3 billion dollar company that provides home and hospice health services to the aging American population. They have 442 Medicare-certified home health agencies and 38 Medicare-certified hospice agencies. 88% of their revenue is from Medicare. In March of this year they bought TLC Health Care Services that operated home nursing and hospice services in 21 states.

They just raised full year earnings guidance to $2.70 - $2.80 a share on the strength of the first quarter. First quarter earnings were up 24%. I believe earnings in the years going forward can easily grow between 15-20% a year. The shares look more attractive to me on any pull-back with the current enterprise value to trailing twelve month (TTM) free cash flow (EV/FCF) at 31 and going for 20x EPS. It looks like a good buy in the mid $40s or lower.

Aehr Test Systems (AEHR) with a market cap of only $70 million really stands out. They are a supplier of semiconductor test and burn-in equipment. Sales were up 89% and earnings a whopping 600% quarter over quarter. With this news in the backdrop the stock is up over 40% over the last 3 months. The driver of growth has been the FOX(TM)-1 full wafer parallel test systems and full wafer test contactors. The FOX-1 full wafer tester can test an entire wafer in a single touchdown offering significant cost savings advantages for conventional testers. They just received acceptance for the FOX-15 wafer-level burn-in system and they believe it will be a catalyst for future growth.

The only thing here I am not over-joyed to see is that sales to their 5 biggest customers accounted for about 81.8% of sales in the quarter. The stock has also had a big run-up recently and I wouldn’t be surprised to see a pull-back before it goes higher. It is hard to believe but Aehr trades for 14x TTM EPS with earnings growth going forward over 40%. The stock has net tangible assets of $3.52 per share and a nice balance sheet with no long-term debt.

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Disclosure: No position in AMED or AEHR