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Bet on These 5 Top Stocks Displaying Attractive Sales Growth
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Strong sales growth is one of the most important characteristics of potential winners in the stock market. The companies that put emphasis on sales management have a competitive advantage, as strong sales are generally converted into growth.
Revenues are often more closely monitored than earnings while assessing the growth of a business. This is because investors want to make sure whether a business has the capability to generate more sales over time to cater to an expanding customer base.
Stable or declining sales growth reflects obstacles at the company and offers limited scope for sustained growth. Stagnant companies may generate near-term profit but do not ensure enough growth to attract new investors.
Without solid top-line growth, bottom-line improvement may not be sustainable over the longer term. While a company can show earnings strength by reducing expenses, a sustainable bottom-line recovery usually requires robust sales growth.
However, sales growth in isolation 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.
Therefore, taking into consideration a company’s cash position along with its 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 potential investments. Most importantly, an adequate cash position suggests that revenues are being channelized in the right direction.
Choosing 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 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.
Here are five of the 14 stocks that qualified the screening:
Based in Roanoke, VA, Advance Auto Parts, Inc. (AAP - Free Report) provides automotive replacement parts, accessories, batteries, and maintenance items. The company has expected sales growth rate of 2.3% for the current year and sports a Zacks Rank #1.
J.B. Hunt Transport Services, Inc. (JBHT - Free Report) provides surface transportation and delivery services. This Lowell, AR-based stock has expected sales growth rate of 12.1% for 2018 and carries a Zacks Rank #2.
Arthur J. Gallagher & Co. (AJG - Free Report) , based in Itasca, IL, offers insurance brokerage and risk management services. Its current year expected sales growth rate is 4.4% and the stock sports a Zacks Rank #1.
Headquartered in Ewing, NJ, Huntington Bancshares Incorporated (HBAN - Free Report) provides commercial, small business, consumer, and mortgage banking services. The company has expected sales growth rate of 6.3% for 2018 and carries a Zacks Rank #2.
SS&C Technologies Holdings, Inc. (SSNC - Free Report) provides software products and software-enabled services to financial service providers. This Windsor, CT-based company’s sales are expected to grow at the rate of 5.4% for 2018 and the stock has 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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Bet on These 5 Top Stocks Displaying Attractive Sales Growth
Strong sales growth is one of the most important characteristics of potential winners in the stock market. The companies that put emphasis on sales management have a competitive advantage, as strong sales are generally converted into growth.
Revenues are often more closely monitored than earnings while assessing the growth of a business. This is because investors want to make sure whether a business has the capability to generate more sales over time to cater to an expanding customer base.
Stable or declining sales growth reflects obstacles at the company and offers limited scope for sustained growth. Stagnant companies may generate near-term profit but do not ensure enough growth to attract new investors.
Without solid top-line growth, bottom-line improvement may not be sustainable over the longer term. While a company can show earnings strength by reducing expenses, a sustainable bottom-line recovery usually requires robust sales growth.
However, sales growth in isolation 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.
Therefore, taking into consideration a company’s cash position along with its 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 potential investments. Most importantly, an adequate cash position suggests that revenues are being channelized in the right direction.
Choosing 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 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. 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:
Based in Roanoke, VA, Advance Auto Parts, Inc. (AAP - Free Report) provides automotive replacement parts, accessories, batteries, and maintenance items. The company has expected sales growth rate of 2.3% for the current year and sports a Zacks Rank #1.
J.B. Hunt Transport Services, Inc. (JBHT - Free Report) provides surface transportation and delivery services. This Lowell, AR-based stock has expected sales growth rate of 12.1% for 2018 and carries a Zacks Rank #2.
Arthur J. Gallagher & Co. (AJG - Free Report) , based in Itasca, IL, offers insurance brokerage and risk management services. Its current year expected sales growth rate is 4.4% and the stock sports a Zacks Rank #1.
Headquartered in Ewing, NJ, Huntington Bancshares Incorporated (HBAN - Free Report) provides commercial, small business, consumer, and mortgage banking services. The company has expected sales growth rate of 6.3% for 2018 and carries a Zacks Rank #2.
SS&C Technologies Holdings, Inc. (SSNC - Free Report) provides software products and software-enabled services to financial service providers. This Windsor, CT-based company’s sales are expected to grow at the rate of 5.4% for 2018 and the stock has 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 »