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Solid Sales Growth Makes These 5 Stocks Attractive Picks
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Robust sales growth is one of the most important characteristics of potential winners in the market. The companies that put more emphasis on sales management have a competitive edge, as strong sales usually translate to improved profitability.
While assessing business growth, revenues are often more monitored than earnings. This is because investors want to make sure whether a business has the capability of generating more sales over time to cater to an expanding customer base.
Stable or declining sales growth indicates obstacles at the company. Stagnant companies may generate near-term profit, but do not ensure enough growth to attract new investors.
Without impressive revenue growth, bottom-line improvement may not be sustainable over a longer term. While a company can show earnings strength by lowering costs, continuous bottom-line improvement usually requires robust sales growth.
Nonetheless, sales growth alone doesn’t indicate much about a company’s future performance. Though it provides investors an insight into product demand and pricing power, a huge sales number is not necessarily translated into profits.
Hence, taking into consideration a company’s cash position along with its sales number can prove to be a more dependable investment strategy. Substantial cash in hand and a steady cash flow give a company more flexibility with respect to business decisions and potential investments. Also, an adequate cash position suggests that revenues are being channelized in the right direction.
Selecting the Winning Stocks
In order to shortlist stocks that have witnessed impressive sales growth along with a high cash balance, we have selected 5-Year Historical Sales Growth (%) greater than X-Industry and Cash Flow greater than $500 million as our main screening parameters.
But sales growth and cash strength are not the absolute criteria for selecting stocks. So, we added certain other factors to arrive at a winning strategy.
Price-to-Sales (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 (4 Weeks) greater than X-Industry: Better-than-industry estimate revision has often been seen to trigger an increase in the stock price.
Operating Margin (Average Last 5 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 for the company.
Return on Equity (ROE) greater than 5%: This metric will ensure that sales growth is being translated into profits and the company is not hoarding cash. A high ROE means 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.
Here are five of the seven stocks that qualified the screening:
Foot Locker, Inc. (FL - Free Report) , based in New York, operates as an athletic shoes and apparel retailer. It has long-term expected earnings per share (EPS) growth rate of 9.71%. The company carries a Zacks Rank #2.
Principal Financial Group, Inc. (PFG - Free Report) provides retirement, asset management, and insurance products and services. This Des Moines, IA-based company currently has a long-term expected EPS growth rate of 8.71% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Headquartered in Los Angeles, CA, CBRE Group, Inc. operates as a commercial real estate services and investment company. The company currently has a long-term expected EPS growth rate of 12.5% and a Zacks Rank #2.
TransUnion (TRU - Free Report) , based in Chicago, IL, provides risk and information solutions. The company has a long-term expected EPS growth rate of 12.77% and carries a Zacks Rank #2.
Activision Blizzard, Inc. develops and publishes games for video game consoles, personal computers, mobile devices, and online social platforms. This Santa Monica, CA-based company has a long-term expected EPS growth rate of 16.19% and carries a Zacks Rank #2.
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
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Solid Sales Growth Makes These 5 Stocks Attractive Picks
Robust sales growth is one of the most important characteristics of potential winners in the market. The companies that put more emphasis on sales management have a competitive edge, as strong sales usually translate to improved profitability.
While assessing business growth, revenues are often more monitored than earnings. This is because investors want to make sure whether a business has the capability of generating more sales over time to cater to an expanding customer base.
Stable or declining sales growth indicates obstacles at the company. Stagnant companies may generate near-term profit, but do not ensure enough growth to attract new investors.
Without impressive revenue growth, bottom-line improvement may not be sustainable over a longer term. While a company can show earnings strength by lowering costs, continuous bottom-line improvement usually requires robust sales growth.
Nonetheless, sales growth alone doesn’t indicate much about a company’s future performance. Though it provides investors an insight into product demand and pricing power, a huge sales number is not necessarily translated into profits.
Hence, taking into consideration a company’s cash position along with its sales number can prove to be a more dependable investment strategy. Substantial cash in hand and a steady cash flow give a company more flexibility with respect to business decisions and potential investments. Also, an adequate cash position suggests that revenues are being channelized in the right direction.
Selecting the Winning Stocks
In order to shortlist stocks that have witnessed impressive sales growth along with a high cash balance, we have selected 5-Year Historical Sales Growth (%) greater than X-Industry and Cash Flow greater than $500 million as our main screening parameters.
But sales growth and cash strength are not the absolute criteria for selecting stocks. So, we added certain other factors to arrive at a winning strategy.
Price-to-Sales (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 (4 Weeks) greater than X-Industry: Better-than-industry estimate revision has often been seen to trigger an increase in the stock price.
Operating Margin (Average Last 5 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 for the company.
Return on Equity (ROE) greater than 5%: This metric will ensure that sales growth is being translated into profits and the company is not hoarding cash. A high ROE means 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.
Here are five of the seven stocks that qualified the screening:
Foot Locker, Inc. (FL - Free Report) , based in New York, operates as an athletic shoes and apparel retailer. It has long-term expected earnings per share (EPS) growth rate of 9.71%. The company carries a Zacks Rank #2.
Principal Financial Group, Inc. (PFG - Free Report) provides retirement, asset management, and insurance products and services. This Des Moines, IA-based company currently has a long-term expected EPS growth rate of 8.71% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Headquartered in Los Angeles, CA, CBRE Group, Inc. operates as a commercial real estate services and investment company. The company currently has a long-term expected EPS growth rate of 12.5% and a Zacks Rank #2.
TransUnion (TRU - Free Report) , based in Chicago, IL, provides risk and information solutions. The company has a long-term expected EPS growth rate of 12.77% and carries a Zacks Rank #2.
Activision Blizzard, Inc. develops and publishes games for video game consoles, personal computers, mobile devices, and online social platforms. This Santa Monica, CA-based company has a long-term expected EPS growth rate of 16.19% and carries a Zacks Rank #2.
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
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »