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Add These 5 Stocks With Solid Sales Growth to Your Portfolio
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Achieving growth is extremely challenging in today’s multifaceted and fast-changing business environment. So, the companies have stepped up marketing initiatives and adopted digital platforms. The firms have become more professional about sales management to drive their top line.
Sales growth is an important metric for any company as it is a vital part of growth projections and is instrumental in strategic decision-making. Hence, sales growth gets more attention from investors in the investment process as a healthy growth rate is usually a positive investment indicator.
Though a company might not be profitable over a particular time period, it usually generates revenues unless there are unforeseen situations. In such cases, the company is valued on the basis of revenues. This is because sales growth (or decline) is usually an early indicator of the company’s future earnings performance.
However, sales growth in isolation doesn’t reveal too much about a company’s future performance. Though it provides investors an insight into product demand and pricing power, a huge sales number does not necessarily translate into profits.
Therefore, a consideration of a company’s cash position along with its sales number can 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. Further, 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 more 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 (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 for it.
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 22 stocks that qualified the screening:
Based in Medina, MN, Polaris Industries Inc. (PII - Free Report) designs, engineers, manufactures and markets power sports vehicles. Expected sales growth rate for the current year is 10.2% and the stock sports a Zacks Rank #1.
Textron Inc. (TXT - Free Report) operates in the aircraft, defense, industrial and finance businesses. This Providence, RI-based company’s expected sales growth rate for 2018 is 2.7% and it carries a Zacks Rank #2.
BGC Partners, Inc. , headquartered in New York, operates as a brokerage company servicing the financial and real estate markets. Its current-year expected sales growth rate is 22.1% and the stock carries a Zacks Rank #2.
Headquartered in Chicago, IL, LKQ Corporation (LKQ - Free Report) distributes replacement parts, components and systems used in the repair and maintenance of vehicles. The company’s expected sales growth rate for 2018 is 21.5% and it sports a Zacks Rank #1.
W.W. Grainger, Inc. (GWW - Free Report) distributes maintenance, repair and operating supplies, and other related products and services. This Lake Forest, IL-based company’s sales are expected to increase at the rate of 8.6% for 2018 and the stock 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.
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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Add These 5 Stocks With Solid Sales Growth to Your Portfolio
Achieving growth is extremely challenging in today’s multifaceted and fast-changing business environment. So, the companies have stepped up marketing initiatives and adopted digital platforms. The firms have become more professional about sales management to drive their top line.
Sales growth is an important metric for any company as it is a vital part of growth projections and is instrumental in strategic decision-making. Hence, sales growth gets more attention from investors in the investment process as a healthy growth rate is usually a positive investment indicator.
Though a company might not be profitable over a particular time period, it usually generates revenues unless there are unforeseen situations. In such cases, the company is valued on the basis of revenues. This is because sales growth (or decline) is usually an early indicator of the company’s future earnings performance.
However, sales growth in isolation doesn’t reveal too much about a company’s future performance. Though it provides investors an insight into product demand and pricing power, a huge sales number does not necessarily translate into profits.
Therefore, a consideration of a company’s cash position along with its sales number can 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. Further, 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 more 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 (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 for it.
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 22 stocks that qualified the screening:
Based in Medina, MN, Polaris Industries Inc. (PII - Free Report) designs, engineers, manufactures and markets power sports vehicles. Expected sales growth rate for the current year is 10.2% and the stock sports a Zacks Rank #1.
Textron Inc. (TXT - Free Report) operates in the aircraft, defense, industrial and finance businesses. This Providence, RI-based company’s expected sales growth rate for 2018 is 2.7% and it carries a Zacks Rank #2.
BGC Partners, Inc. , headquartered in New York, operates as a brokerage company servicing the financial and real estate markets. Its current-year expected sales growth rate is 22.1% and the stock carries a Zacks Rank #2.
Headquartered in Chicago, IL, LKQ Corporation (LKQ - Free Report) distributes replacement parts, components and systems used in the repair and maintenance of vehicles. The company’s expected sales growth rate for 2018 is 21.5% and it sports a Zacks Rank #1.
W.W. Grainger, Inc. (GWW - Free Report) distributes maintenance, repair and operating supplies, and other related products and services. This Lake Forest, IL-based company’s sales are expected to increase at the rate of 8.6% for 2018 and the stock 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
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 »