Growth stocks are attractive to many investors, as above-average financial growth helps these stocks easily grab the market's attention and produce exceptional returns. But finding a growth stock that can live up to its true potential can be a tough task.
That's because, these stocks usually carry above-average risk and volatility. In fact, betting on a stock for which the growth story is actually over or nearing its end 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.
Schnitzer Steel is one such stock that our proprietary system currently recommends. The company not only has a favorable Growth Score, but also carries a top Zacks Rank.
Studies have shown that stocks with the best growth features consistently outperform the market. And for stocks that have a combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy), returns are even better.
Here are three of the most important factors that make the stock of this recycler of ferrous and nonferrous scrap metal 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 Schnitzer Steel is 4.9%, investors should actually focus on the projected growth. The company's EPS is expected to grow 690.7% this year, crushing the industry average, which calls for EPS growth of 156.8%.
Impressive Asset Utilization Ratio
Growth investors often overlook asset utilization ratio, also known as sales-to-total-assets (S/TA) ratio, but it is an important feature of a real growth stock. This metric shows how efficiently a firm is utilizing its assets to generate sales.
Right now, Schnitzer Steel has an S/TA ratio of 1.39, which means that the company gets $1.39 in sales for each dollar in assets. Comparing this to the industry average of 0.86, it can be said that the company is more efficient.
In addition to efficiency in generating sales, sales growth plays an important role. And Schnitzer Steel looks attractive from a sales growth perspective as well. The company's sales are expected to grow 42.9% this year versus the industry average of 17.6%.
Promising Earnings Estimate Revisions
Superiority of a stock in terms of the metrics outlined above can be further validated by looking at the trend in earnings estimate revisions. A positive trend is of course favorable here. Empirical research shows that there is a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
The current-year earnings estimates for Schnitzer Steel have been revising upward. The Zacks Consensus Estimate for the current year has surged 13.3% over the past month.
Bottom Line
Schnitzer Steel has not only earned a Growth Score of B 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 Schnitzer Steel well for outperformance, so growth investors may want to bet on it.
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Is Schnitzer Steel (SCHN) a Solid Growth Stock? 3 Reasons to Think " Yes "
Growth stocks are attractive to many investors, as above-average financial growth helps these stocks easily grab the market's attention and produce exceptional returns. But finding a growth stock that can live up to its true potential can be a tough task.
That's because, these stocks usually carry above-average risk and volatility. In fact, betting on a stock for which the growth story is actually over or nearing its end 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.
Schnitzer Steel is one such stock that our proprietary system currently recommends. The company not only has a favorable Growth Score, but also carries a top Zacks Rank.
Studies have shown that stocks with the best growth features consistently outperform the market. And for stocks that have a combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy), returns are even better.
Here are three of the most important factors that make the stock of this recycler of ferrous and nonferrous scrap metal 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 Schnitzer Steel is 4.9%, investors should actually focus on the projected growth. The company's EPS is expected to grow 690.7% this year, crushing the industry average, which calls for EPS growth of 156.8%.
Impressive Asset Utilization Ratio
Growth investors often overlook asset utilization ratio, also known as sales-to-total-assets (S/TA) ratio, but it is an important feature of a real growth stock. This metric shows how efficiently a firm is utilizing its assets to generate sales.
Right now, Schnitzer Steel has an S/TA ratio of 1.39, which means that the company gets $1.39 in sales for each dollar in assets. Comparing this to the industry average of 0.86, it can be said that the company is more efficient.
In addition to efficiency in generating sales, sales growth plays an important role. And Schnitzer Steel looks attractive from a sales growth perspective as well. The company's sales are expected to grow 42.9% this year versus the industry average of 17.6%.
Promising Earnings Estimate Revisions
Superiority of a stock in terms of the metrics outlined above can be further validated by looking at the trend in earnings estimate revisions. A positive trend is of course favorable here. Empirical research shows that there is a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
The current-year earnings estimates for Schnitzer Steel have been revising upward. The Zacks Consensus Estimate for the current year has surged 13.3% over the past month.
Bottom Line
Schnitzer Steel has not only earned a Growth Score of B 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 Schnitzer Steel well for outperformance, so growth investors may want to bet on it.