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5 Stocks With Robust Sales Growth to Beat Recession Woes
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At present, one must consider the changing market backdrop and chalk out an investment strategy to help generate robust returns. Markets are bearing the brunt of the ongoing Russia-Ukraine conflict, unprecedented inflation numbers and recessionary fears.
Amid such bearish investor sentiments, a conventional stock picking strategy is useful. One such method is selecting stocks with strong sales growth. So, stocks like Boyd Gaming Corporation (BYD - Free Report) , Lithia Motors, Inc. (LAD - Free Report) , Everest Re Group, Ltd. , Jones Lang LaSalle Incorporated (JLL - Free Report) and QuidelOrtho Corporation (QDEL - Free Report) are worth considering.
One should keep in mind that sales growth is one of the primary factors for the long-term success of any company. Continuous growth in sales holds the key to the survival of any business. Sales growth not only provides insight into product demand and pricing power but is also important for growth projections and strategic decision-making.
It should be kept in mind that in case a company incurs a loss (although temporarily), it is valued on its revenues as top-line growth (or decline) is usually an indicator of its future earnings performance. Also, the absence of sales growth indicates that the company’s market share is not improving. Hence, some sustained sales growth is required to support the bottom line.
Price-to-Sales (P/S) ratio can turn out to be a suitable metric for stock valuation. The importance of the metric lies in the fact that management has limited opportunities to manipulate revenues unlike earnings.
Nevertheless, a huge sales number does not necessarily convert into profits. Hence, it is more prudent to consider a company’s cash position along with its sales number. Substantial cash in hand and a steady cash flow lend 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 20 stocks that qualified the screening:
Las Vegas-based Boyd Gaming is a multi-jurisdictional gaming company. BYD owns and operates gaming entertainment properties in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio and Pennsylvania.
Boyd Gaming’s expected sales growth rate for 2022 is 3%. The stock currently carries a Zacks Rank #2.
Medford, OR-based Lithia Motors is one of the leading automotive retailers of new and used vehicles and related services in the United States. The core brands offered by LAD include Chrysler, General Motors, Toyota, Subaru, Honda, Acura, Ford, BMW, MINI, Nissan and Hyundai.
Lithia Motors’ sales are expected to jump 29.9% for 2022. The stock sports a Zacks Rank #1 at present.
Headquartered in Hamilton, Bermuda, Everest Re writes property and casualty, reinsurance and insurance in the United States, Bermuda and international markets. RE virtually underwrites all classes and categories of business in the treaty, facultative and specialty lines both through brokers and directly with ceding companies.
Everest Re’s expected sales growth for 2022 is 10.7%. The company, at present, carries a Zacks Rank #2.
Jones Lang LaSalle, headquartered in Chicago, IL, is a leading full-service real estate firm that provides corporate, financial and investment management services to corporations and other real estate owners, users and investors worldwide. JLL divides its business into two primary categories: Real Estate Services (RES) and Investment Management (IM).
Jones Lang LaSalle’s expected sales growth rate for 2022 is 8.2%. The stock carries a Zacks Rank #2 at present.
QuidelOrtho, based in San Diego, CA, is a key player in the development, manufacturing and marketing of rapid diagnostic testing solutions. QDEL sells its products directly to end users and distributors, in each case, for professional use.
QuidelOrtho’s expected sales growth rate for 2022 is 49.1%. 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 Robust Sales Growth to Beat Recession Woes
At present, one must consider the changing market backdrop and chalk out an investment strategy to help generate robust returns. Markets are bearing the brunt of the ongoing Russia-Ukraine conflict, unprecedented inflation numbers and recessionary fears.
Amid such bearish investor sentiments, a conventional stock picking strategy is useful. One such method is selecting stocks with strong sales growth. So, stocks like Boyd Gaming Corporation (BYD - Free Report) , Lithia Motors, Inc. (LAD - Free Report) , Everest Re Group, Ltd. , Jones Lang LaSalle Incorporated (JLL - Free Report) and QuidelOrtho Corporation (QDEL - Free Report) are worth considering.
One should keep in mind that sales growth is one of the primary factors for the long-term success of any company. Continuous growth in sales holds the key to the survival of any business. Sales growth not only provides insight into product demand and pricing power but is also important for growth projections and strategic decision-making.
It should be kept in mind that in case a company incurs a loss (although temporarily), it is valued on its revenues as top-line growth (or decline) is usually an indicator of its future earnings performance. Also, the absence of sales growth indicates that the company’s market share is not improving. Hence, some sustained sales growth is required to support the bottom line.
Price-to-Sales (P/S) ratio can turn out to be a suitable metric for stock valuation. The importance of the metric lies in the fact that management has limited opportunities to manipulate revenues unlike earnings.
Nevertheless, a huge sales number does not necessarily convert into profits. Hence, it is more prudent to consider a company’s cash position along with its sales number. Substantial cash in hand and a steady cash flow lend 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 20 stocks that qualified the screening:
Las Vegas-based Boyd Gaming is a multi-jurisdictional gaming company. BYD owns and operates gaming entertainment properties in Nevada, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio and Pennsylvania.
Boyd Gaming’s expected sales growth rate for 2022 is 3%. The stock currently carries a Zacks Rank #2.
Medford, OR-based Lithia Motors is one of the leading automotive retailers of new and used vehicles and related services in the United States. The core brands offered by LAD include Chrysler, General Motors, Toyota, Subaru, Honda, Acura, Ford, BMW, MINI, Nissan and Hyundai.
Lithia Motors’ sales are expected to jump 29.9% for 2022. The stock sports a Zacks Rank #1 at present.
Headquartered in Hamilton, Bermuda, Everest Re writes property and casualty, reinsurance and insurance in the United States, Bermuda and international markets. RE virtually underwrites all classes and categories of business in the treaty, facultative and specialty lines both through brokers and directly with ceding companies.
Everest Re’s expected sales growth for 2022 is 10.7%. The company, at present, carries a Zacks Rank #2.
Jones Lang LaSalle, headquartered in Chicago, IL, is a leading full-service real estate firm that provides corporate, financial and investment management services to corporations and other real estate owners, users and investors worldwide. JLL divides its business into two primary categories: Real Estate Services (RES) and Investment Management (IM).
Jones Lang LaSalle’s expected sales growth rate for 2022 is 8.2%. The stock carries a Zacks Rank #2 at present.
QuidelOrtho, based in San Diego, CA, is a key player in the development, manufacturing and marketing of rapid diagnostic testing solutions. QDEL sells its products directly to end users and distributors, in each case, for professional use.
QuidelOrtho’s expected sales growth rate for 2022 is 49.1%. 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