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Here is Why Growth Investors Should Buy The Shyft Group (SHYF) Now
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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.
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 The Shyft Group (SHYF - Free Report) as one such stock. This 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.
While there are numerous reasons why the stock of this maker of chassis for Last Mile Delivery, RVs and other vehicles is a great growth pick right now, we have highlighted three of the most important factors below:
Earnings Growth
Arguably nothing is more important than earnings growth, as surging profit levels is what most investors are after. And for growth investors, double-digit earnings growth is definitely preferable, and often an indication of strong prospects (and stock price gains) for the company under consideration.
While the historical EPS growth rate for The Shyft Group is 46%, investors should actually focus on the projected growth. The company's EPS is expected to grow 50.2% this year, crushing the industry average, which calls for EPS growth of 47.6%.
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 exhibits how efficiently a firm is utilizing its assets to generate sales.
Right now, The Shyft Group has an S/TA ratio of 2.19, which means that the company gets $2.19 in sales for each dollar in assets. Comparing this to the industry average of 1.03, it can be said that the company is more efficient.
In addition to efficiency in generating sales, sales growth plays an important role. And The Shyft Group is well positioned from a sales growth perspective too. The company's sales are expected to grow 40.4% this year versus the industry average of 15.2%.
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 The Shyft Group. The Zacks Consensus Estimate for the current year has surged 9.8% over the past month.
Bottom Line
While the overall earnings estimate revisions have made The Shyft Group a Zacks Rank #2 stock, it has earned itself a Growth Score of A based on a number of factors, including the ones discussed above.
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Here is Why Growth Investors Should Buy The Shyft Group (SHYF) Now
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.
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 The Shyft Group (SHYF - Free Report) as one such stock. This 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.
While there are numerous reasons why the stock of this maker of chassis for Last Mile Delivery, RVs and other vehicles is a great growth pick right now, we have highlighted three of the most important factors below:
Earnings Growth
Arguably nothing is more important than earnings growth, as surging profit levels is what most investors are after. And for growth investors, double-digit earnings growth is definitely preferable, and often an indication of strong prospects (and stock price gains) for the company under consideration.
While the historical EPS growth rate for The Shyft Group is 46%, investors should actually focus on the projected growth. The company's EPS is expected to grow 50.2% this year, crushing the industry average, which calls for EPS growth of 47.6%.
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 exhibits how efficiently a firm is utilizing its assets to generate sales.
Right now, The Shyft Group has an S/TA ratio of 2.19, which means that the company gets $2.19 in sales for each dollar in assets. Comparing this to the industry average of 1.03, it can be said that the company is more efficient.
In addition to efficiency in generating sales, sales growth plays an important role. And The Shyft Group is well positioned from a sales growth perspective too. The company's sales are expected to grow 40.4% this year versus the industry average of 15.2%.
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 The Shyft Group. The Zacks Consensus Estimate for the current year has surged 9.8% over the past month.
Bottom Line
While the overall earnings estimate revisions have made The Shyft Group a Zacks Rank #2 stock, it has earned itself a Growth Score of A based on a number of factors, including the ones discussed above.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
This combination positions The Shyft Group well for outperformance, so growth investors may want to bet on it.