We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
5 Stocks With Solid Sales Growth Worth Betting on Right Now
Read MoreHide Full Article
Investors often fail to watch for sales growth while selecting stocks as a company’s stock price is usually sensitive to its earnings momentum. Yet, earnings are not the be-all and end-all in the sense that books can be easily manipulated. That’s why sales should always be taken into consideration.
Sales growth is an important indicator of a company's health and ability to sustain its business. It offers investors an insight into product demand and pricing power. The main advantage is that the sales figure is generally not manipulated and is less volatile than earnings.
Without some revenue growth, bottom-line improvement may not be sustainable in the long term. While a company can show earnings strength by reducing expenses, a sustainable bottom-line recovery usually requires sales growth.
Focusing exclusively on sales growth is not enough though. A healthy sales growth rate is certainly a positive indicator for picking good stocks, but it does not ensure profits. So, taking into consideration a company’s cash position along with its sales number can prove to be a more dependable strategy.
Substantial cash on hand and a steady cash flow give a company more flexibility regarding business decisions and potential investments. Cash also enables a company to endure market downturns. Most importantly, a sufficient cash position indicates that revenues are being channelized in the right direction.
Picking 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 17 stocks that qualified the screening:
Headquartered in Richfield, MN, Best Buy Company Inc. (BBY - Free Report) is a multinational specialty retailer of consumer electronics, home office products, entertainment software, communication, food preparation, wellness, health, security, appliances, and related services. Its expected sales growth rate for fiscal 2022 is 9.6%. The stock currently sports a Zacks Rank #1.
Based in Purchase, NY, Atlas Air Worldwide Holdings provides outsourced aircraft and aviation operating services. The company’s expected sales growth rate for 2021 is 20.3%. It currently carries a Zacks Rank #2.
Genpact Limited (G - Free Report) manages business processes for companies around the world. This Hamilton, Bermuda-based company’s sales are expected to grow at a rate of 7.5% for 2021. The stock carries a Zacks Rank #2 at present.
Pembroke, Bermuda-based, Arch Capital Group Ltd. (ACGL - Free Report) offers insurance, reinsurance, and mortgage insurance across the world. Its expected sales growth rate for 2021 is 27.6%. The stock carries a Zacks Rank #2 at present.
Saskatoon, Canada-based Nutrien Ltd. (NTR - Free Report) is a leading integrated provider of crop inputs and services. Its expected sales growth rate for 2021 is 20.7%. The stock sports a Zacks Rank #1 at present.
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.
Image: Bigstock
5 Stocks With Solid Sales Growth Worth Betting on Right Now
Investors often fail to watch for sales growth while selecting stocks as a company’s stock price is usually sensitive to its earnings momentum. Yet, earnings are not the be-all and end-all in the sense that books can be easily manipulated. That’s why sales should always be taken into consideration.
Sales growth is an important indicator of a company's health and ability to sustain its business. It offers investors an insight into product demand and pricing power. The main advantage is that the sales figure is generally not manipulated and is less volatile than earnings.
Without some revenue growth, bottom-line improvement may not be sustainable in the long term. While a company can show earnings strength by reducing expenses, a sustainable bottom-line recovery usually requires sales growth.
Focusing exclusively on sales growth is not enough though. A healthy sales growth rate is certainly a positive indicator for picking good stocks, but it does not ensure profits. So, taking into consideration a company’s cash position along with its sales number can prove to be a more dependable strategy.
Substantial cash on hand and a steady cash flow give a company more flexibility regarding business decisions and potential investments. Cash also enables a company to endure market downturns. Most importantly, a sufficient cash position indicates that revenues are being channelized in the right direction.
Picking 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 17 stocks that qualified the screening:
Headquartered in Richfield, MN, Best Buy Company Inc. (BBY - Free Report) is a multinational specialty retailer of consumer electronics, home office products, entertainment software, communication, food preparation, wellness, health, security, appliances, and related services. Its expected sales growth rate for fiscal 2022 is 9.6%. The stock currently sports a Zacks Rank #1.
Based in Purchase, NY, Atlas Air Worldwide Holdings provides outsourced aircraft and aviation operating services. The company’s expected sales growth rate for 2021 is 20.3%. It currently carries a Zacks Rank #2.
Genpact Limited (G - Free Report) manages business processes for companies around the world. This Hamilton, Bermuda-based company’s sales are expected to grow at a rate of 7.5% for 2021. The stock carries a Zacks Rank #2 at present.
Pembroke, Bermuda-based, Arch Capital Group Ltd. (ACGL - Free Report) offers insurance, reinsurance, and mortgage insurance across the world. Its expected sales growth rate for 2021 is 27.6%. The stock carries a Zacks Rank #2 at present.
Saskatoon, Canada-based Nutrien Ltd. (NTR - Free Report) is a leading integrated provider of crop inputs and services. Its expected sales growth rate for 2021 is 20.7%. The stock sports a Zacks Rank #1 at present.
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