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Investing in Good Governance: Two Stocks to Watch

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These stocks exhibit good corporate governance and are seeing faster growth in revenue than accounts receivable year-over-year.

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Last week we focused on one of our favorite tools, CSRHub. Considering the seemingly never-ending stream of bad behavior emerging from company board rooms, and the reminder this week of Lehman Brothers' collapse, it felt appropriate to use their site again when screening for stocks.

For this list we turned to CSRHub's governance ratings, which ranks a company based on criteria including leadership ethics, executive pay, transparency, board composition, and stakeholder treatment.

We searched CSRHub for only US-traded companies exhibiting good corporate governance, so those with a governance rating above 75, and market capitalization above $500 million.

Next we looked for positive trends among balance sheets, to see if any of these stocks have healthy numbers to back up their good corporate practices. We specifically searched among data in accounts receivable, comparing growth in revenue to growth in accounts receivable. Since accounts receivable is the portion of revenue not yet received, and there is no guarantee the money will ever be received, the smaller the portion of revenue made up of receivables the healthier the company's total revenue.

We screened for stocks seeing faster growth in revenue than accounts receivable year-over-year, as well as accounts receivable comprising a smaller portion of current assets over the same time period.

Just two companies remained in our results.

1. Apogee Enterprises, Inc. (NASDAQ:APOG): APOG engages in the design and development of glass products, services, and systems. (Market cap at $838.M, most recent closing price at $29.50.)
  • CSRHub governance rating: 77/100.
  • Revenue grew by 16.34% during the most recent quarter ($179.31M vs. $154.13M y/y). Accounts receivable grew by 3.39% during the same time period ($117.96M vs. $114.09M y/y).
  • Receivables, as a percentage of current assets, decreased from 52.3% to 50.27% during the most recent quarter (comparing 13 weeks ending June 1, 2013 to 13 weeks ending June 2, 2012).
  • Apogee was included in the 2008 SB20 list of the world's top sustainable business stocks, and includes corporate governance guidelines as part of its company culture and business practices.

2. Gran Tierra Energy, Inc. (NYSE:GTE): GTE engages in the acquisition, exploration, development, and production of oil and gas properties in Colombia, Argentina, Peru, and Brazil. (Market cap at $2.08B, most recent closing price at $7.36.)
  • CSRHub governance rating: 79/100.
  • Revenue grew by 46.6% during the most recent quarter ($168.81M vs. $115.15M y/y). Accounts receivable grew by 6.49% during the same time period ($121.69M vs. $114.27M y/y).
  • Receivables, as a percentage of current assets, decreased from 40.73% to 28.55% during the most recent quarter (comparing three months ending June 30, 2013 to three months ending June 30, 2012).
  • Gran Tierra's balance sheet saw an increase in revenue in its latest earnings report of 47% -- $168.8 million in the second quarter of 2013 compared to the same quarter last year.

Editor's note: This story by Emily Smykal originally appeared on Kapitall.

Kapitall's lists break complex concepts down to their basics, offering education and investing ideas to novices that double as a refresher course for more seasoned investors. Inspired by video game design, Kapitall's revolutionary brokerage platform combines a graphical user interface with tools that make it easy to build portfolios, share ideas and execute trades.

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