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5 Stocks With Robust Sales Growth to Counter Volatile Markets

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Given the extremely volatile 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.

Thus, amid such a scenario, a conventional stock picking strategy is useful. One such method is selecting stocks with steady sales growth. In this regard, stocks like Methanex Corporation (MEOH - Free Report) , Carlisle Companies (CSL - Free Report) , Huntington Ingalls Industries, Inc. (HII - Free Report) , Cheniere Energy Inc. (LNG - Free Report) and Vistra Corp. (VST - Free Report) are worthy bets.

Steady sales growth holds the key to survival in an ever-changing and highly competitive business environment. It is worth keeping in mind that when companies incur losses, although temporarily, they are valued based on their revenues, as top-line growth (or decline) is usually an indicator of a company’s future earnings performance.
A company can improve earnings by resorting to expense control measures while maintaining stable revenues. However, sustainable bottom-line growth invariably requires higher revenues. Hence, the Price-to-Sales (P/S) ratio can be an apt metric for stock valuation. The importance of this metric lies in the fact that management has limited scope to manipulate revenues, unlike earnings.

While sales growth provides investors an understanding of product demand and pricing power, it doesn’t reflect whether the company is operating efficiently. A huge sales number does not necessarily convert into profits.

Hence, considering a company’s cash position and its sales can be a more dependable strategy. Significant 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 13 stocks that qualified the screening:

Vancouver, BC-based Methanex is the world’s largest supplier of methanol. MEOH currently operates production sites in New Zealand, the United States, Trinidad and Tobago, Egypt, Canada and Chile.

Methanex’s expected sales growth rate for 2022 is 5.8%. The stock currently carries a Zacks Rank #2.

Scottsdale, AZ -based Carlisle is a diversified, global portfolio of niche brands and businesses with highly engineered and high-margin products. CSL is engaged in the design, manufacture and sale of a wide range of roofing and waterproofing products, engineered products and finishing equipment.

Carlisle’s sales are expected to increase 31.1% for 2022. The stock sports a Zacks Rank #1 at present.

Based in Newport News, VA, Huntington Ingalls designs, builds and maintains nuclear-powered ships. HII operates through three segments: Ingalls division, Newport News Shipbuilding division and Technical Solutions division.

Huntington Ingalls’ expected sales growth for 2022 is 13.9%. The company, at present, carries a Zacks Rank #2.

Cheniere Energy, headquartered in Houston, TX, is primarily engaged in businesses related to liquefied natural gas. LNG operates through its two business segments: LNG terminal and LNG and natural gas marketing.

Cheniere Energy’s expected sales growth rate for 2022 is 81.3%. The stock sports a Zacks Rank #1 at present.

Irving, TX-based Vistra operates as an integrated retail electricity and power generation company. VST operates through six segments: Retail, Texas, East, West, Sunset and Asset Closure.

Vistra’s expected sales growth rate for 2022 is 33.4%. The stock sports a Zacks Rank #1 currently.

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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:

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