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5 Top-Ranked Stocks with Impressive Sales Growth to Bet On
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With the Q1 reporting cycle in full swing, everyone must be looking forward to earnings performance. But one should keep in mind that solid sales growth is one of the major factors for the long-term success of any company.
Continuous growth in sales holds the key to survival of any business. For any company, sales growth not only provides an insight into product demand and pricing power, it is important for growth projections and strategic decision making.
However, individual investors often fail to take into account sales growth as a dependable metric. This could be because of investors’ preconceived notion that a company’s stock price is generally sensitive to its earnings momentum.
Nevertheless, it should be kept in mind that in case a company incurs a loss (albeit temporarily), it is valued on its revenues as top-line growth (or decline) is usually an indicator of a company’s future earnings performance.
Also, in an improving economy, the absence of sales growth indicates that the company’s market share is not increasing. So, some sustained sales growth is required to support the bottom line.
Therefore, Price-to-Sales (P/S) ratio can turn out to be a suitable metric for stock valuation. The importance of the metric lies in the fact that management has limited opportunities to manipulate revenues unlike earnings.
However, a huge sales number does not necessarily convert into profits. Hence, it’s more prudent to consider a company’s cash position along with its sales number. Substantial cash in hand and a steady cash flow lend a company more flexibility with respect to business decisions and investments.
Picking the Winners
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 13 stocks that qualified the screening:
Morgan Stanley (MS - Free Report) provides various financial products and services. This New York-based company currently has long-term expected earnings per share (EPS) growth rate of 13.20% and carries a Zacks Rank #2.
Constellation Brands, Inc. (STZ - Free Report) , based in Victor, NY, produces, imports, and markets beer, wine, and spirits. It has long-term expected EPS growth rate of 17.80%. The company sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Headquartered in Auburn Hills, MI, BorgWarner Inc. (BWA - Free Report) provides solutions for combustion, hybrid, and electric vehicles worldwide. The company currently has a long-term expected EPS growth rate of 8.60% and a Zacks Rank #2.
Western Digital Corporation (WDC - Free Report) , based in Irvine, CA, develops, manufactures, and sells data storage devices and solutions. The company has a long-term expected EPS growth rate of 12.10% and sports a Zacks Rank #1.
AMETEK, Inc. (AME - Free Report) manufactures electronic instruments and electromechanical devices. This Berwyn, PA-based company has a long-term expected EPS growth rate of 11% 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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5 Top-Ranked Stocks with Impressive Sales Growth to Bet On
With the Q1 reporting cycle in full swing, everyone must be looking forward to earnings performance. But one should keep in mind that solid sales growth is one of the major factors for the long-term success of any company.
Continuous growth in sales holds the key to survival of any business. For any company, sales growth not only provides an insight into product demand and pricing power, it is important for growth projections and strategic decision making.
However, individual investors often fail to take into account sales growth as a dependable metric. This could be because of investors’ preconceived notion that a company’s stock price is generally sensitive to its earnings momentum.
Nevertheless, it should be kept in mind that in case a company incurs a loss (albeit temporarily), it is valued on its revenues as top-line growth (or decline) is usually an indicator of a company’s future earnings performance.
Also, in an improving economy, the absence of sales growth indicates that the company’s market share is not increasing. So, some sustained sales growth is required to support the bottom line.
Therefore, Price-to-Sales (P/S) ratio can turn out to be a suitable metric for stock valuation. The importance of the metric lies in the fact that management has limited opportunities to manipulate revenues unlike earnings.
However, a huge sales number does not necessarily convert into profits. Hence, it’s more prudent to consider a company’s cash position along with its sales number. Substantial cash in hand and a steady cash flow lend a company more flexibility with respect to business decisions and investments.
Picking the Winners
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 13 stocks that qualified the screening:
Morgan Stanley (MS - Free Report) provides various financial products and services. This New York-based company currently has long-term expected earnings per share (EPS) growth rate of 13.20% and carries a Zacks Rank #2.
Constellation Brands, Inc. (STZ - Free Report) , based in Victor, NY, produces, imports, and markets beer, wine, and spirits. It has long-term expected EPS growth rate of 17.80%. The company sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Headquartered in Auburn Hills, MI, BorgWarner Inc. (BWA - Free Report) provides solutions for combustion, hybrid, and electric vehicles worldwide. The company currently has a long-term expected EPS growth rate of 8.60% and a Zacks Rank #2.
Western Digital Corporation (WDC - Free Report) , based in Irvine, CA, develops, manufactures, and sells data storage devices and solutions. The company has a long-term expected EPS growth rate of 12.10% and sports a Zacks Rank #1.
AMETEK, Inc. (AME - Free Report) manufactures electronic instruments and electromechanical devices. This Berwyn, PA-based company has a long-term expected EPS growth rate of 11% 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 »