Success in business is very often a function of innovation. There is a Shanghai firm that understands that principle very well indeed. It has established itself as an advertising powerhouse, with the aid of 200,000 flat panel TVs.

Focus Media Holding (NASDAQ: FMCN) operates an advertising network of television displays throughout China. The devices are placed in high-traffic areas, such as office buildings, hotels, airports, retail chain stores and the public areas of residential complexes. The company also operates an advertising network for the Chinese mobile telecommunications market and recently acquired China's largest Internet advertising agency. Clients include Alcatel-Lucent (NYSE: ALU), Nokia (NYSE: NOK), Motorola (NYSE: MOT), Coca-Cola (NYSE: KO), Yum! Brands (NYSE: YUM), Procter & Gamble (NYSE: PG) and General Motors (NYSE: GM).

The company surprised the Street earlier in the month, when it announced Q1 EPS of 21 cents and revenues of $58.1 million. Analysts had been looking for 19 cents and $55.4 million. Management also guided Q2 EPS to 34-35 cents (34 cent consensus) and Q2 revenues to $103-$107 million ($90.3M consensus). The CEO noted a solid rebound in sales into the second quarter.

The news popped the shares out of a late April/early May "cup" into the late May "handle" of a Cup & Handle formation. The price is now showing signs of completing the pattern with a bullish rise from the right-hand side of the "handle".

Brokers recommend the shares with two "strong buys" and eight "buys". Analysts expect a 42% average annual growth rate, through the next five years. The FMCN Sales Growth rate (75.33%), EPS Growth rate (90.91%), Operating Margin (34.91%), Net Profit Margin (37.84%) and Return on Assets (9.81%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 44% of the outstanding shares. Over the past 52 weeks, FMCN has traded between $25.42 and $45.45. A stop-loss of $37.25 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.