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5 Stocks With Robust Sales Growth to Add to Your Portfolio
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When it comes to choosing stocks, investors often opt for complex investment strategies in a bid to book higher returns. But with ever changing market dynamics, this may not yield the desired results every time. Therefore, 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. Sales growth as such remains a vital measure for any corporate house, as it is important to growth projections and strategic decision making.
So, when companies incur losses for a temporary period, they are valued based on their revenues, as top-line growth (or decline) is usually an indicator of a company’s future earnings performance. Also, in contrast to price to earnings and price to book value ratios, which can turn negative and cease to be relevant, price-to-sales (P/S) ratio is available even for companies that have hit choppy waters.
Additionally, profits and book value are largely influenced by several factors including accounting decisions tied with depreciation, significant charges and inventory. However, management has limited opportunities to manipulate sales, which further underscores the importance of P/S ratio.
Hence, P/S ratio can serve as a more reliable metric for stock valuation. Focusing solely on sales growth is, however, not enough.
A consideration of a company’s cash position along with its sales can be a more dependable strategy. Significant cash in hand and steady cash flow give a company more flexibility with respect to business decisions and investments.
Picking 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 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 12 stocks that qualified the screening:
Based in West Palm Beach, FL, Platform Specialty Products Corporation produces and sells specialty chemical products. The company has expected sales growth rate of 4.4% for the current year and carries a Zacks Rank #2.
Xylem Inc. (XYL - Free Report) is engaged in the design, manufacture, and service of engineered solutions for water and wastewater applications. This Rye Brook, NY-based stock has expected sales growth rate of 9% for 2018 and carries a Zacks Rank #2.
Cognizant Technology Solutions Corporation (CTSH - Free Report) , based in Teaneck, NJ, provides consulting and technology, and outsourcing services. Its current year expected sales growth rate is 9.4% and the stock sports a Zacks Rank #1.
Headquartered in Newport News, VA, Huntington Ingalls Industries, Inc. (HII - Free Report) is engaged in designing, building, overhauling, and repairing military ships. The company has expected sales growth rate of 2.4% for 2018 and sports a Zacks Rank #1.
Applied Materials, Inc. (AMAT - Free Report) provides manufacturing equipment, services, and software. This Santa Clara, CA-based company’s sales are expected to grow at the rate of 19.6% for 2018 and the stock has 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.
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 Stocks With Robust Sales Growth to Add to Your Portfolio
When it comes to choosing stocks, investors often opt for complex investment strategies in a bid to book higher returns. But with ever changing market dynamics, this may not yield the desired results every time. Therefore, 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. Sales growth as such remains a vital measure for any corporate house, as it is important to growth projections and strategic decision making.
So, when companies incur losses for a temporary period, they are valued based on their revenues, as top-line growth (or decline) is usually an indicator of a company’s future earnings performance. Also, in contrast to price to earnings and price to book value ratios, which can turn negative and cease to be relevant, price-to-sales (P/S) ratio is available even for companies that have hit choppy waters.
Additionally, profits and book value are largely influenced by several factors including accounting decisions tied with depreciation, significant charges and inventory. However, management has limited opportunities to manipulate sales, which further underscores the importance of P/S ratio.
Hence, P/S ratio can serve as a more reliable metric for stock valuation. Focusing solely on sales growth is, however, not enough.
A consideration of a company’s cash position along with its sales can be a more dependable strategy. Significant cash in hand and steady cash flow give a company more flexibility with respect to business decisions and investments.
Picking 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 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 12 stocks that qualified the screening:
Based in West Palm Beach, FL, Platform Specialty Products Corporation produces and sells specialty chemical products. The company has expected sales growth rate of 4.4% for the current year and carries a Zacks Rank #2.
Xylem Inc. (XYL - Free Report) is engaged in the design, manufacture, and service of engineered solutions for water and wastewater applications. This Rye Brook, NY-based stock has expected sales growth rate of 9% for 2018 and carries a Zacks Rank #2.
Cognizant Technology Solutions Corporation (CTSH - Free Report) , based in Teaneck, NJ, provides consulting and technology, and outsourcing services. Its current year expected sales growth rate is 9.4% and the stock sports a Zacks Rank #1.
Headquartered in Newport News, VA, Huntington Ingalls Industries, Inc. (HII - Free Report) is engaged in designing, building, overhauling, and repairing military ships. The company has expected sales growth rate of 2.4% for 2018 and sports a Zacks Rank #1.
Applied Materials, Inc. (AMAT - Free Report) provides manufacturing equipment, services, and software. This Santa Clara, CA-based company’s sales are expected to grow at the rate of 19.6% for 2018 and the stock has 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
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 »