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Invest in These 5 Top Stocks With Attractive Sales Growth
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A steady sales growth is the key to survival for any company in today’s highly competitive environment. Companies have stepped up marketing initiatives over digital platforms and become more professional about sales management to drive top-line growth.
Flat or declining sales growth indicates obstacles at the company, which will limit scope for sustained growth. Stagnant companies may generate profits for a short period, but they do not ensure enough growth to attract new investors.
Also, revenues are often more closely monitored than earnings when assessing the growth of a business. It’s worth keeping in mind that in cases when companies incur a loss, albeit transitorily, they are valued on their revenues, as top-line growth (or decline) is usually an indicator of a company’s future earnings performance.
So, the price-to-sales ratio can turn out to be an appropriate metric for stock valuation. This metric’s importance further lies in the fact that management has limited opportunities to manipulate revenues, unlike earnings.
Yet, focusing only on sales growth is not enough. 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 investments.
Selecting Winning Stocks
In order to shortlist stocks with impressive sales growth and 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. Hence, we have added certain other factors to arrive at a winning strategy.
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.
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 that the company is spending wisely and is in all likelihood profitable.
Here are five of the 19 stocks that qualified the screening:
Headquartered in Purchase, NY, PepsiCo (PEP - Free Report) is one of the leading global food and beverage companies. Its expected sales growth rate for 2021 is 6.5%. The stock currently carries a Zacks Rank #2.
Lennar (LEN - Free Report) , based in Miami, FL, is engaged in homebuilding and financial services in the United States. The company’s expected sales growth rate for fiscal 2021 is 10.8% and it currently sports a Zacks Rank #1.
Headquartered in Midland, TX, Diamondback Energy (FANG - Free Report) is an independent oil and gas exploration & production company. Its expected sales growth rate for 2021 is 43.7%. The stock sports a Zacks Rank #1 at present.
Columbus, OH-based Huntington Bancshares (HBAN - Free Report) is a diversified regional bank holding company. Its expected sales growth rate for 2021 is 2.7%. The stock sports a Zacks Rank #1 at present.
Based in Houston, TX, CenterPoint Energy (CNP - Free Report) is a domestic energy delivery company that provides electric transmission & distribution, natural gas distribution and competitive natural gas sales and services operations. Its expected sales growth rate for 2021 is 4.3%. The stock currently 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.
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Invest in These 5 Top Stocks With Attractive Sales Growth
A steady sales growth is the key to survival for any company in today’s highly competitive environment. Companies have stepped up marketing initiatives over digital platforms and become more professional about sales management to drive top-line growth.
Flat or declining sales growth indicates obstacles at the company, which will limit scope for sustained growth. Stagnant companies may generate profits for a short period, but they do not ensure enough growth to attract new investors.
Also, revenues are often more closely monitored than earnings when assessing the growth of a business. It’s worth keeping in mind that in cases when companies incur a loss, albeit transitorily, they are valued on their revenues, as top-line growth (or decline) is usually an indicator of a company’s future earnings performance.
So, the price-to-sales ratio can turn out to be an appropriate metric for stock valuation. This metric’s importance further lies in the fact that management has limited opportunities to manipulate revenues, unlike earnings.
Yet, focusing only on sales growth is not enough. 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 investments.
Selecting Winning Stocks
In order to shortlist stocks with impressive sales growth and 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. Hence, we have added certain other factors to arrive at a winning strategy.
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.
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 that 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 19 stocks that qualified the screening:
Headquartered in Purchase, NY, PepsiCo (PEP - Free Report) is one of the leading global food and beverage companies. Its expected sales growth rate for 2021 is 6.5%. The stock currently carries a Zacks Rank #2.
Lennar (LEN - Free Report) , based in Miami, FL, is engaged in homebuilding and financial services in the United States. The company’s expected sales growth rate for fiscal 2021 is 10.8% and it currently sports a Zacks Rank #1.
Headquartered in Midland, TX, Diamondback Energy (FANG - Free Report) is an independent oil and gas exploration & production company. Its expected sales growth rate for 2021 is 43.7%. The stock sports a Zacks Rank #1 at present.
Columbus, OH-based Huntington Bancshares (HBAN - Free Report) is a diversified regional bank holding company. Its expected sales growth rate for 2021 is 2.7%. The stock sports a Zacks Rank #1 at present.
Based in Houston, TX, CenterPoint Energy (CNP - Free Report) is a domestic energy delivery company that provides electric transmission & distribution, natural gas distribution and competitive natural gas sales and services operations. Its expected sales growth rate for 2021 is 4.3%. The stock currently 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