With a Foreign Accent

Some stateside stocks tap into overseas expansion

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Russian customers try out a new Starbucks in Moscow. The chain is making a major push abroad.

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You don't have to invest in foreign stocks to share in booming overseas growth. And American companies profiting abroad even include midsized players you may not have heard of. Here are five to watch:

Chindex. China's population is getting older and richer. So when an affluent Chinese boomer blows out a knee trying to emulate Yao Ming on the basketball court, he may seek out an emergency room run by Bethesda, Md.-based Chindex. The company has supplied western medical technologies to China since 1981, and in 1997 it began offering healthcare services including ERs, intensive-care units, operating rooms, and clinical labs. Chindex runs hospitals and clinics in Beijing and Shanghai and plans new western-style facilities in Guangzhou and eastern China. "There's a strong demand for their type of hospitals around the country," says Scott Hood, a portfolio manager for First Wilshire Securities Management. With a price-to-earnings ratio of 40 based on expected earnings, the stock isn't cheap. But net income has increased 58 percent in the second quarter, and analysts expect earnings to grow 57 percent over the next 12 months.

Grant Prideco. Booming economies have beaucoup energy needs, and this Houston drill pipe maker looks to play a big role in pulling that energy out of the earth. With plants in North America, Europe, and Asia, it has a 55 percent global market share as a maker of drill pipe. Second-quarter revenues jumped 21 percent over last year, thanks in part to growth in the Middle East and Africa. Analysts expect double-digit sales growth this year and next, with 2008 earnings expected to grow at around 16 percent. The company is expected to supply pipe for 250 new drilling rigs annually over the next several years in China alone, says John Derrick, director of research for U.S. Global Investors. The stock trades at a forward P/E ratio of 11.

NII Holdings. NII, formerly known as Nextel International, is expanding its wireless network south of the border, particularly in Argentina, Brazil, Chile, Mexico, and Peru. In the second quarter, the Reston, Va., company added 331,000 net subscribers, bringing its total to nearly 4.1 million wireless users worldwide. Jeff Bianchi, comanager of the ING Mid-Cap Opportunities Fund, says he expects a "very rapid growth rate in subscribers" over the next year to 18 months. NII is also pulling more cash from each customer while trimming costs. NII, whose shares trade at a forward P/E ratio of about 20, predicts subscriber growth of 37 percent in 2007 as it expands in Brazil and Mexico, leading to a $100 million jump in annual revenue, to $3.2 billion.

Starbucks. It may seem as if there is a Starbucks on every American corner, but the company says you haven't seen anything yet. Starbucks has over 14,000 locations in over 42 countries. But it plans to rain coffee beans down upon the globe at 20,000 U.S. and Canadian locations, plus another 20,000 elsewhere across the globe, including Brazil, Mexico, Russia, and especially China. Starbucks expects the growing middle class of that traditionally tea-drinking society to be the second-largest market for premium coffee outside the United States. Baristas are already brewing java at over 400 Chinese locations. "The younger generation is looking for new things," says Yiorgo Aretos, head of TMP Group, a market analysis firm. "They want to break away from the old culture." Starbucks reported a 20 percent bump in third-quarter earnings, with international revenue growing 28 percent. It expects revenue growth of 20 percent this year and 18 percent in 2008. Its stock trades at a forward P/E ratio of about 25. "The company shows potential for good profit growth with a significant runway for further growth internationally," say portfolio managers Mark Fuller and Gregory Pusinelli of William Blair Funds. Starbucks, which doesn't pay a dividend, plans to keep percolating by retaining earnings to finance continued expansion.

SunPower. The sleek, high-efficiency cells and panels produced by SunPower generate up to 50 percent more power than conventional solar technologies do. The San Jose, Calif., subsidiary of Cypress Semiconductor Corp. expanded its global reach earlier this year by acquiring PowerLight Corp., which owns solar power plants in South Korea. SunPower aims to cut in half the cost of an installed solar system by 2012. "If the price of solar power comes down in the next three or four years, I think SunPower is uniquely situated to benefit from that," says Walter Price, a portfolio manager for RCM. That's a big "if," of course, and with a P/E ratio of 45 based on expected earnings, SunPower isn't cheap. But Price believes the company can show 30 to 40 percent annual growth over the next five to 10 years. Analysts expect revenues to grow 214 percent in 2007 and 55 percent in 2008. That's one sunny outlook.