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5 Stocks With Solid Sales Growth to Navigate Market Turmoil
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Due to high volatility in the markets, it has become increasingly difficult for investors to select stocks and generate robust returns. Markets are currently bearing the brunt of the ongoing Russia-Ukraine conflict and unprecedented inflation numbers.
The conventional stock picking strategy is useful amid such a challenging operating backdrop. One such method is selecting stocks with steady sales growth. In this regard, stocks like Cleveland-Cliffs Inc. (CLF - Free Report) , WestRock Company (WRK - Free Report) , 3M Company (MMM - Free Report) , Valley National Bancorp (VLY - Free Report) and Matador Resources Company (MTDR - Free Report) are worthy bets.
Sales growth is an important financial indicator, which is often neglected while searching for a profitable investment strategy. Maintaining steady sales growth is vital for any business to remain competitive. Revenues are often more closely monitored than earnings when assessing the growth of a business.
It’s worth keeping in mind that when companies incur a loss, albeit briefly, they are valued on their revenues, as top-line growth (or decline) is usually an indicator of future earnings performance.
So, the Price-to-Sales (P/S) ratio can be an apt metric for stock valuation. It remains a major stock selection criterion as management usually has limited opportunities to manipulate revenues, unlike earnings. Thus, the P/S ratio is subject to lesser influence than the Price-to-Earnings ratio.
Sales growth in isolation, however, does not assure success. Considering a company’s cash position along with its sales number can be a more dependable strategy. Substantial cash in hand and steady cash flow give a company more flexibility with respect to business decisions and investments.
Selecting the Winning Stocks
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 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 29 stocks that qualified the screening:
Cleveland, OH-based Cleveland-Cliffs is the largest producer of iron ore pellets in North America. CLF is also the biggest flat-rolled steel producer in the region.
Cleveland-Cliffs’ expected sales growth rate for 2022 is 12.9%. The stock currently sports a Zacks Rank #1.
Atlanta, GA-based WestRock is a multinational paper and packaging solutions provider for consumer and corrugated packaging markets. WRK is one of the largest integrated producers of containerboard by tons produced and one of the largest producers of high-graphics preprinted linerboard based on net sales in North America.
WestRock’s sales are expected to increase 13.6% for fiscal 2022. The stock sports a Zacks Rank #1 at present.
Based in St. Paul, MN, 3M Company operates as a diversified technology firm. MMM has manufacturing operations across the globe and serves a diversified customer base.
3M Company’s expected sales growth for 2022 is 1.6%. The company, at present, carries a Zacks Rank #2.
Valley National, based in Wayne, NJ, offers various commercial, retail, insurance and wealth management financial services products. VLY conducts operations through more than 230 branch offices across the northern and central New Jersey, the New York City Boroughs of Manhattan, Brooklyn, Queens, and Long Island, Florida and Alabama.
Valley National’s expected sales growth rate for 2022 is 26.5%. The stock carries a Zacks Rank #2 at present.
Dallas, TX-based Matador Resources is among the leading oil and gas explorer in the shale and unconventional resources in the United States. MTDR’s upstream operations are primarily concentrated in the Delaware and Midland basins — two sub-basins of Permian — and South Texas’ Eagle Ford shale.
Matador Resources’ expected sales growth rate for 2022 is 73.4%. The stock sports a Zacks Rank #1 currently.
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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5 Stocks With Solid Sales Growth to Navigate Market Turmoil
Due to high volatility in the markets, it has become increasingly difficult for investors to select stocks and generate robust returns. Markets are currently bearing the brunt of the ongoing Russia-Ukraine conflict and unprecedented inflation numbers.
The conventional stock picking strategy is useful amid such a challenging operating backdrop. One such method is selecting stocks with steady sales growth. In this regard, stocks like Cleveland-Cliffs Inc. (CLF - Free Report) , WestRock Company (WRK - Free Report) , 3M Company (MMM - Free Report) , Valley National Bancorp (VLY - Free Report) and Matador Resources Company (MTDR - Free Report) are worthy bets.
Sales growth is an important financial indicator, which is often neglected while searching for a profitable investment strategy. Maintaining steady sales growth is vital for any business to remain competitive. Revenues are often more closely monitored than earnings when assessing the growth of a business.
It’s worth keeping in mind that when companies incur a loss, albeit briefly, they are valued on their revenues, as top-line growth (or decline) is usually an indicator of future earnings performance.
So, the Price-to-Sales (P/S) ratio can be an apt metric for stock valuation. It remains a major stock selection criterion as management usually has limited opportunities to manipulate revenues, unlike earnings. Thus, the P/S ratio is subject to lesser influence than the Price-to-Earnings ratio.
Sales growth in isolation, however, does not assure success. Considering a company’s cash position along with its sales number can be a more dependable strategy. Substantial cash in hand and steady cash flow give a company more flexibility with respect to business decisions and investments.
Selecting the Winning Stocks
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 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 29 stocks that qualified the screening:
Cleveland, OH-based Cleveland-Cliffs is the largest producer of iron ore pellets in North America. CLF is also the biggest flat-rolled steel producer in the region.
Cleveland-Cliffs’ expected sales growth rate for 2022 is 12.9%. The stock currently sports a Zacks Rank #1.
Atlanta, GA-based WestRock is a multinational paper and packaging solutions provider for consumer and corrugated packaging markets. WRK is one of the largest integrated producers of containerboard by tons produced and one of the largest producers of high-graphics preprinted linerboard based on net sales in North America.
WestRock’s sales are expected to increase 13.6% for fiscal 2022. The stock sports a Zacks Rank #1 at present.
Based in St. Paul, MN, 3M Company operates as a diversified technology firm. MMM has manufacturing operations across the globe and serves a diversified customer base.
3M Company’s expected sales growth for 2022 is 1.6%. The company, at present, carries a Zacks Rank #2.
Valley National, based in Wayne, NJ, offers various commercial, retail, insurance and wealth management financial services products. VLY conducts operations through more than 230 branch offices across the northern and central New Jersey, the New York City Boroughs of Manhattan, Brooklyn, Queens, and Long Island, Florida and Alabama.
Valley National’s expected sales growth rate for 2022 is 26.5%. The stock carries a Zacks Rank #2 at present.
Dallas, TX-based Matador Resources is among the leading oil and gas explorer in the shale and unconventional resources in the United States. MTDR’s upstream operations are primarily concentrated in the Delaware and Midland basins — two sub-basins of Permian — and South Texas’ Eagle Ford shale.
Matador Resources’ expected sales growth rate for 2022 is 73.4%. The stock sports a Zacks Rank #1 currently.
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