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5 Stocks with Steady Sales Growth to Invest in Right Now
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Steady sales growth holds the key to survival in an ever changing and highly competitive business environment. But when it comes to picking stocks, investors often ignore sales growth as a dependable metric. This might be because of their preconceived notion that a company’s stock price is typically sensitive to its earnings momentum.
But it’s worth keeping in mind that when companies incur losses, albeit 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.
Further, 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.
So, a consideration of a company’s cash position along with 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
In order to shortlist stocks that have witnessed impressive sales growth along with a high cash balance, we have selected 5-Year Historical Sales Growth (%) greater than X-Industry and Cash Flow greater than $500 million as our main screening parameters.
But sales growth and cash strength are not the absolute criteria for selecting stocks. So, we added certain other factors to arrive at a winning strategy.
Price-to-Sales (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 (4 Weeks) greater than X-Industry: Better-than-industry estimate revision has often been seen to trigger an increase in stock price.
Operating Margin (Average Last 5 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 for the company.
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 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 23 stocks that qualified the screening:
Based in Bethesda, MD, Marriott International (MAR - Free Report) operates, franchises, and licenses hotel, residential, and timeshare properties. The company has expected sales growth rate of 4.5% for the current year and carries a Zacks Rank #2.
American Equity Investment Life Holding Company (AEL - Free Report) provides life insurance products and services. This West Des Moines, IA-based stock has expected sales growth rate of 5.1% for 2018 and sports a Zacks Rank #1.
The Chemours Company (CC - Free Report) , based in Wilmington, DE, provides performance chemicals. Its current year expected sales growth rate is 13.3% and the stock carries a Zacks Rank #2.
Headquartered in Norcross, GA, FleetCor Technologies, Inc. provides fuel cards, commercial payment and data solutions, gift card and stored value solutions, and workforce payment products and services. The company has expected sales growth rate of 14.1% for 2018 and carries a Zacks Rank #2.
CBRE Group, Inc. operates as a commercial real estate services and investment company. This Los Angeles, CA-based company’s sales are expected to grow at the rate of 8.2% for 2018 and the stock has a Zacks Rank #2.
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
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5 Stocks with Steady Sales Growth to Invest in Right Now
Steady sales growth holds the key to survival in an ever changing and highly competitive business environment. But when it comes to picking stocks, investors often ignore sales growth as a dependable metric. This might be because of their preconceived notion that a company’s stock price is typically sensitive to its earnings momentum.
But it’s worth keeping in mind that when companies incur losses, albeit 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.
Further, 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.
So, a consideration of a company’s cash position along with 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
In order to shortlist stocks that have witnessed impressive sales growth along with a high cash balance, we have selected 5-Year Historical Sales Growth (%) greater than X-Industry and Cash Flow greater than $500 million as our main screening parameters.
But sales growth and cash strength are not the absolute criteria for selecting stocks. So, we added certain other factors to arrive at a winning strategy.
Price-to-Sales (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 (4 Weeks) greater than X-Industry: Better-than-industry estimate revision has often been seen to trigger an increase in stock price.
Operating Margin (Average Last 5 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 for the company.
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 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 23 stocks that qualified the screening:
Based in Bethesda, MD, Marriott International (MAR - Free Report) operates, franchises, and licenses hotel, residential, and timeshare properties. The company has expected sales growth rate of 4.5% for the current year and carries a Zacks Rank #2.
American Equity Investment Life Holding Company (AEL - Free Report) provides life insurance products and services. This West Des Moines, IA-based stock has expected sales growth rate of 5.1% for 2018 and sports a Zacks Rank #1.
The Chemours Company (CC - Free Report) , based in Wilmington, DE, provides performance chemicals. Its current year expected sales growth rate is 13.3% and the stock carries a Zacks Rank #2.
Headquartered in Norcross, GA, FleetCor Technologies, Inc. provides fuel cards, commercial payment and data solutions, gift card and stored value solutions, and workforce payment products and services. The company has expected sales growth rate of 14.1% for 2018 and carries a Zacks Rank #2.
CBRE Group, Inc. operates as a commercial real estate services and investment company. This Los Angeles, CA-based company’s sales are expected to grow at the rate of 8.2% for 2018 and the stock has a Zacks Rank #2.
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
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »