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Is Radiant Logistics (RLGT) a Solid Growth Stock? 3 Reasons to Think " Yes "
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Growth investors focus on stocks that are seeing above-average financial growth, as this feature helps these securities garner the market's attention and deliver solid returns. However, it isn't easy to find a great growth stock.
By their very nature, these stocks carry above-average risk and volatility. Moreover, if a company's growth story is over or nearing its end, betting on it could lead to significant loss.
However, the task of finding cutting-edge growth stocks is made easy with the help of the Zacks Growth Style Score (part of the Zacks Style Scores system), which looks beyond the traditional growth attributes to analyze a company's real growth prospects.
Our proprietary system currently recommends Radiant Logistics (RLGT - Free Report) as one such stock. This company not only has a favorable Growth Score, but also carries a top Zacks Rank.
Research shows that stocks carrying the best growth features consistently beat the market. And returns are even better for stocks that possess the combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Here are three of the most important factors that make the stock of this transportation and logistics services company a great growth pick right now.
Earnings Growth
Arguably nothing is more important than earnings growth, as surging profit levels is what most investors are after. For growth investors, double-digit earnings growth is highly preferable, as it is often perceived as an indication of strong prospects (and stock price gains) for the company under consideration.
While the historical EPS growth rate for Radiant Logistics is 23%, investors should actually focus on the projected growth. The company's EPS is expected to grow 62.1% this year, crushing the industry average, which calls for EPS growth of 24.2%.
Impressive Asset Utilization Ratio
Asset utilization ratio -- also known as sales-to-total-assets (S/TA) ratio -- is often overlooked by investors, but it is an important indicator in growth investing. This metric shows how efficiently a firm is utilizing its assets to generate sales.
Right now, Radiant Logistics has an S/TA ratio of 3.09, which means that the company gets $3.09 in sales for each dollar in assets. Comparing this to the industry average of 1.43, it can be said that the company is more efficient.
In addition to efficiency in generating sales, sales growth plays an important role. And Radiant Logistics looks attractive from a sales growth perspective as well. The company's sales are expected to grow 13.5% this year versus the industry average of 8.4%.
Promising Earnings Estimate Revisions
Beyond the metrics outlined above, investors should consider the trend in earnings estimate revisions. A positive trend is a plus here. Empirical research shows that there is a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
There have been upward revisions in current-year earnings estimates for Radiant Logistics. The Zacks Consensus Estimate for the current year has surged 6.8% over the past month.
Bottom Line
Radiant Logistics has not only earned a Growth Score of A based on a number of factors, including the ones discussed above, but it also carries a Zacks Rank #1 because of the positive earnings estimate revisions.
Image: Bigstock
Is Radiant Logistics (RLGT) a Solid Growth Stock? 3 Reasons to Think " Yes "
Growth investors focus on stocks that are seeing above-average financial growth, as this feature helps these securities garner the market's attention and deliver solid returns. However, it isn't easy to find a great growth stock.
By their very nature, these stocks carry above-average risk and volatility. Moreover, if a company's growth story is over or nearing its end, betting on it could lead to significant loss.
However, the task of finding cutting-edge growth stocks is made easy with the help of the Zacks Growth Style Score (part of the Zacks Style Scores system), which looks beyond the traditional growth attributes to analyze a company's real growth prospects.
Our proprietary system currently recommends Radiant Logistics (RLGT - Free Report) as one such stock. This company not only has a favorable Growth Score, but also carries a top Zacks Rank.
Research shows that stocks carrying the best growth features consistently beat the market. And returns are even better for stocks that possess the combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Here are three of the most important factors that make the stock of this transportation and logistics services company a great growth pick right now.
Earnings Growth
Arguably nothing is more important than earnings growth, as surging profit levels is what most investors are after. For growth investors, double-digit earnings growth is highly preferable, as it is often perceived as an indication of strong prospects (and stock price gains) for the company under consideration.
While the historical EPS growth rate for Radiant Logistics is 23%, investors should actually focus on the projected growth. The company's EPS is expected to grow 62.1% this year, crushing the industry average, which calls for EPS growth of 24.2%.
Impressive Asset Utilization Ratio
Asset utilization ratio -- also known as sales-to-total-assets (S/TA) ratio -- is often overlooked by investors, but it is an important indicator in growth investing. This metric shows how efficiently a firm is utilizing its assets to generate sales.
Right now, Radiant Logistics has an S/TA ratio of 3.09, which means that the company gets $3.09 in sales for each dollar in assets. Comparing this to the industry average of 1.43, it can be said that the company is more efficient.
In addition to efficiency in generating sales, sales growth plays an important role. And Radiant Logistics looks attractive from a sales growth perspective as well. The company's sales are expected to grow 13.5% this year versus the industry average of 8.4%.
Promising Earnings Estimate Revisions
Beyond the metrics outlined above, investors should consider the trend in earnings estimate revisions. A positive trend is a plus here. Empirical research shows that there is a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
There have been upward revisions in current-year earnings estimates for Radiant Logistics. The Zacks Consensus Estimate for the current year has surged 6.8% over the past month.
Bottom Line
Radiant Logistics has not only earned a Growth Score of A based on a number of factors, including the ones discussed above, but it also carries a Zacks Rank #1 because of the positive earnings estimate revisions.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
This combination positions Radiant Logistics well for outperformance, so growth investors may want to bet on it.