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5 Stocks With Solid Sales Growth to Shield Against Market Woes
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Since the beginning of 2022, markets have been bearing the brunt of macroeconomic and geopolitical ambiguity. Amid such serious concerns, investors are wary of entering the market. However, a conventional stock picking strategy would be useful in such times for generating robust returns.
One such method is picking stocks with steady sales growth. In this regard, stocks like PepsiCo Inc. (PEP - Free Report) , UFP Industries, Inc. (UFPI - Free Report) , Carlisle Companies Incorporated (CSL - Free Report) , Broadridge Financial Solutions, Inc. (BR - Free Report) and Silgan Holdings Inc. (SLGN - Free Report) are worth a look.
While assessing any company, revenues are often more monitored than earnings. This is because investors want to make sure whether a business has the capability of generating more sales over time to cater to an expanding customer base. Stable or declining sales growth indicates obstacles at the company. Stagnant companies may generate near-term profit but do not ensure enough growth to attract new investors.
Without solid revenue growth, bottom-line improvement may not be sustainable over the long term. While a company can show earnings strength by lowering costs, continuous bottom-line improvement usually requires robust sales growth.
Hence, the Price-to-Sales (P/S) ratio can turn out to be a suitable metric for stock valuation. It remains a key stock selection criteria keeping in mind that management usually has limited opportunities to tamper with revenues as they can with earnings. Thus, the P/S ratio is subject to lesser manipulation than the Price-to-Earnings ratio.
Yet, sales growth alone doesn’t indicate much about a company’s future performance. So, taking into consideration a company’s cash position along with its sales number can prove to be a more dependable investment strategy. Substantial cash in hand and a steady cash flow give a company more flexibility with respect to business decisions and potential investments.
Selecting the Potential 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 18 stocks that qualified the screening:
Headquartered in Purchase, NY, PepsiCo is one of the leading global food and beverage companies. PEP’s complementary brands/businesses include Frito-Lay snacks, Pepsi-Cola beverages, Gatorade sports drinks, Tropicana juices and Quaker foods.
PepsiCo’s expected sales growth rate for 2022 is 5.6%. The stock currently carries a Zacks Rank #2.
Based in Grand Rapids, MI, UFP Industries is a holding company with its subsidiaries throughout North America, Europe, Asia and Australia. UFPI supplies wood, wood composite and other products in retail, industrial, and construction market.
UFP Industries’ sales are expected to rise 11.4% for 2022. The stock sports a Zacks Rank #1 at present.
Based in Scottsdale, AZ, 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 expected sales growth for 2022 is 39.4%. The company, at present, sports a Zacks Rank #1.
Broadridge Financial, based in Lake Success, NY, is a global financial technology company that offers investor communications and technology-driven solutions. BR is a leading producer and distributor of a variety of documents, widely used in the financial industry, including proxies, annual reports, prospectuses and trade confirmations.
Broadridge Financial’s expected sales growth rate for fiscal 2023 is 7.5%. The stock carries a Zacks Rank #2 at present.
Headquartered in Stamford, CT, Silgan Holdings is a leading supplier of rigid packaging for consumer goods products. SLGN is the largest metal-container supplier for food products in North America.
Silgan Holdings’ expected sales growth rate for 2022 is 12.8%. The stock carries a Zacks Rank #2 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 Shield Against Market Woes
Since the beginning of 2022, markets have been bearing the brunt of macroeconomic and geopolitical ambiguity. Amid such serious concerns, investors are wary of entering the market. However, a conventional stock picking strategy would be useful in such times for generating robust returns.
One such method is picking stocks with steady sales growth. In this regard, stocks like PepsiCo Inc. (PEP - Free Report) , UFP Industries, Inc. (UFPI - Free Report) , Carlisle Companies Incorporated (CSL - Free Report) , Broadridge Financial Solutions, Inc. (BR - Free Report) and Silgan Holdings Inc. (SLGN - Free Report) are worth a look.
While assessing any company, revenues are often more monitored than earnings. This is because investors want to make sure whether a business has the capability of generating more sales over time to cater to an expanding customer base. Stable or declining sales growth indicates obstacles at the company. Stagnant companies may generate near-term profit but do not ensure enough growth to attract new investors.
Without solid revenue growth, bottom-line improvement may not be sustainable over the long term. While a company can show earnings strength by lowering costs, continuous bottom-line improvement usually requires robust sales growth.
Hence, the Price-to-Sales (P/S) ratio can turn out to be a suitable metric for stock valuation. It remains a key stock selection criteria keeping in mind that management usually has limited opportunities to tamper with revenues as they can with earnings. Thus, the P/S ratio is subject to lesser manipulation than the Price-to-Earnings ratio.
Yet, sales growth alone doesn’t indicate much about a company’s future performance. So, taking into consideration a company’s cash position along with its sales number can prove to be a more dependable investment strategy. Substantial cash in hand and a steady cash flow give a company more flexibility with respect to business decisions and potential investments.
Selecting the Potential 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 18 stocks that qualified the screening:
Headquartered in Purchase, NY, PepsiCo is one of the leading global food and beverage companies. PEP’s complementary brands/businesses include Frito-Lay snacks, Pepsi-Cola beverages, Gatorade sports drinks, Tropicana juices and Quaker foods.
PepsiCo’s expected sales growth rate for 2022 is 5.6%. The stock currently carries a Zacks Rank #2.
Based in Grand Rapids, MI, UFP Industries is a holding company with its subsidiaries throughout North America, Europe, Asia and Australia. UFPI supplies wood, wood composite and other products in retail, industrial, and construction market.
UFP Industries’ sales are expected to rise 11.4% for 2022. The stock sports a Zacks Rank #1 at present.
Based in Scottsdale, AZ, 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 expected sales growth for 2022 is 39.4%. The company, at present, sports a Zacks Rank #1.
Broadridge Financial, based in Lake Success, NY, is a global financial technology company that offers investor communications and technology-driven solutions. BR is a leading producer and distributor of a variety of documents, widely used in the financial industry, including proxies, annual reports, prospectuses and trade confirmations.
Broadridge Financial’s expected sales growth rate for fiscal 2023 is 7.5%. The stock carries a Zacks Rank #2 at present.
Headquartered in Stamford, CT, Silgan Holdings is a leading supplier of rigid packaging for consumer goods products. SLGN is the largest metal-container supplier for food products in North America.
Silgan Holdings’ expected sales growth rate for 2022 is 12.8%. The stock carries a Zacks Rank #2 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