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5 Stocks With Robust Sales Growth Worth Betting on Right Now
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When it comes to choosing stocks, investors are often beguiled into undertaking complex investment strategies in a bid to book higher returns. However, given ever changing market dynamics, this may not yield desired results every time.
Hence, using conventional strategies based on key fundamentals to choose stocks is always a wise decision. One such strategy is sales growth.
Maintaining steady sales growth is the key to survival for any business, particularly amid the current operating environment. Sales growth as such remains an important measure for any corporate house, as it is vital to growth projections and strategic decision making.
When companies incur loss for a temporary period, they are valued on their revenues, as sales growth (or decline) is usually an indicator of future earnings performance. Further, in comparison with price-to-earnings and price-to-book value ratios, which can turn negative and cease to be relevant, the price-to-sales (P/S) ratio is available even for firms that have hit choppy waters.
Moreover, profits and book value are largely influenced by several factors. But management has limited opportunities to manipulate sales, which further underscores the importance of P/S ratio.
Focusing solely on sales growth is, however, not enough. Considering a company’s cash position along with sales number can prove to be a more dependable strategy. Substantial cash in hand and a steady cash flow give a company more flexibility with respect to business decisions and investments.
Selecting Winning Stocks
In order to shortlist stocks with impressive sales growth and a high cash balance, we have selected 5-Year Historical Sales Growth (%) greater than X-Industry and Cash Flow more than $500 million as our main screening parameters.
But sales growth and cash strength are not the absolute criteria for selecting stocks. Hence, we have added certain other factors to arrive at a winning strategy.
P/S Ratio less than X-Industry: This metric determines the value placed on each dollar of a company’s revenues. The lower the ratio, the better it is for picking a stock since the investor is paying less for each unit of sales.
% Change F1 Sales Estimate Revisions (four weeks) greater than X-Industry: Estimate revisions, better than the industry, are often seen to trigger an increase in stock price.
Operating Margin (average last five years) greater than 5%: Operating margin measures how much every dollar of a company's sales translates into profits. A high ratio indicates that the company has good cost control and sales are increasing faster than costs — an optimal situation.
Return on Equity (ROE) greater than 5%: This metric will ensure that sales growth is translated into profits and the company is not hoarding cash. A high ROE means that the company is spending wisely and is in all likelihood profitable.
Here are five of the 14 stocks that qualified the screening:
Owens Corning Inc (OC - Free Report) — based in Toledo, OH — is a world leader in building materials systems and composite solutions. Its expected sales growth rate for 2021 is 5.1%. The stock currently carries a Zacks Rank #2.
Headquartered in New York, Macquarie Infrastructure Corporation owns and operates a portfolio of businesses that provides services to other firms, government agencies and individuals. Its expected sales growth rate for 2021 is 15.9%. The stock sports a Zacks Rank #1 at present.
Waltham, MA-based PerkinElmer, Inc. provides scientific instruments, consumables, and services to pharmaceutical, biomedical, environmental testing, chemical, as well as general industrial markets. The company’s expected earnings growth rate for 2021 is 7% and it currently carries a Zacks Rank #2.
Portland General Electric Company (POR - Free Report) — headquartered in Portland, OR— is an integrated electric utility company. Its expected sales growth rate for 2021 is 1.4%. The stock carries a Zacks Rank #2 at present.
Based in Chicago, IL, TransUnion (TRU - Free Report) is one of the leading global providers of risk and information solutions to businesses and consumers. Its expected sales growth rate for 2021 is 8.8%. The stock currently sports a Zacks Rank #1.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and backtesting software.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
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5 Stocks With Robust Sales Growth Worth Betting on Right Now
When it comes to choosing stocks, investors are often beguiled into undertaking complex investment strategies in a bid to book higher returns. However, given ever changing market dynamics, this may not yield desired results every time.
Hence, using conventional strategies based on key fundamentals to choose stocks is always a wise decision. One such strategy is sales growth.
Maintaining steady sales growth is the key to survival for any business, particularly amid the current operating environment. Sales growth as such remains an important measure for any corporate house, as it is vital to growth projections and strategic decision making.
When companies incur loss for a temporary period, they are valued on their revenues, as sales growth (or decline) is usually an indicator of future earnings performance. Further, in comparison with price-to-earnings and price-to-book value ratios, which can turn negative and cease to be relevant, the price-to-sales (P/S) ratio is available even for firms that have hit choppy waters.
Moreover, profits and book value are largely influenced by several factors. But management has limited opportunities to manipulate sales, which further underscores the importance of P/S ratio.
Focusing solely on sales growth is, however, not enough. Considering a company’s cash position along with sales number can prove to be a more dependable strategy. Substantial cash in hand and a steady cash flow give a company more flexibility with respect to business decisions and investments.
Selecting Winning Stocks
In order to shortlist stocks with impressive sales growth and a high cash balance, we have selected 5-Year Historical Sales Growth (%) greater than X-Industry and Cash Flow more than $500 million as our main screening parameters.
But sales growth and cash strength are not the absolute criteria for selecting stocks. Hence, we have added certain other factors to arrive at a winning strategy.
P/S Ratio less than X-Industry: This metric determines the value placed on each dollar of a company’s revenues. The lower the ratio, the better it is for picking a stock since the investor is paying less for each unit of sales.
% Change F1 Sales Estimate Revisions (four weeks) greater than X-Industry: Estimate revisions, better than the industry, are often seen to trigger an increase in stock price.
Operating Margin (average last five years) greater than 5%: Operating margin measures how much every dollar of a company's sales translates into profits. A high ratio indicates that the company has good cost control and sales are increasing faster than costs — an optimal situation.
Return on Equity (ROE) greater than 5%: This metric will ensure that sales growth is translated into profits and the company is not hoarding cash. A high ROE means that the company is spending wisely and is in all likelihood profitable.
Zacks Rank less than or equal to 2: Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks are known to outperform irrespective of the market environment. You can see the complete list of today’s Zacks #1 Rank stocks here.
Here are five of the 14 stocks that qualified the screening:
Owens Corning Inc (OC - Free Report) — based in Toledo, OH — is a world leader in building materials systems and composite solutions. Its expected sales growth rate for 2021 is 5.1%. The stock currently carries a Zacks Rank #2.
Headquartered in New York, Macquarie Infrastructure Corporation owns and operates a portfolio of businesses that provides services to other firms, government agencies and individuals. Its expected sales growth rate for 2021 is 15.9%. The stock sports a Zacks Rank #1 at present.
Waltham, MA-based PerkinElmer, Inc. provides scientific instruments, consumables, and services to pharmaceutical, biomedical, environmental testing, chemical, as well as general industrial markets. The company’s expected earnings growth rate for 2021 is 7% and it currently carries a Zacks Rank #2.
Portland General Electric Company (POR - Free Report) — headquartered in Portland, OR— is an integrated electric utility company. Its expected sales growth rate for 2021 is 1.4%. The stock carries a Zacks Rank #2 at present.
Based in Chicago, IL, TransUnion (TRU - Free Report) is one of the leading global providers of risk and information solutions to businesses and consumers. Its expected sales growth rate for 2021 is 8.8%. The stock currently sports a Zacks Rank #1.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and backtesting software.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance