We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Solid Sales Growth Makes These 5 Stocks Worth Considering
Read MoreHide Full Article
Strong sales growth is one of the most important characteristics of potential winners in the stock market. Companies that emphasize on sales management have a competitive advantage, as solid sales generally get converted into growth.
Sales are often more closely monitored than earnings when assessing the growth of a business. 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.
Stagnant or declining sales indicate obstacles at the company and offer limited scope for sustained growth. Stagnant companies may generate near-term profit but do not ensure enough growth to attract new investors.
Without robust sales growth, the bottom-line improvement may not be sustainable over the longer term. While a company can show earnings strength by lowering expenses, sustainable bottom-line improvement typically requires impressive sales growth.
However, sales growth in isolation doesn’t indicate much about a company’s future prospects. Though it provides investors an insight into product demand and pricing power, a huge sales number does not necessarily translate into profits.
Therefore, taking into consideration a company’s cash position along with its sales number can prove to be a more dependable strategy. Substantial cash in hand and a steady cash flow give a company more flexibility with respect to business decisions and potential investments. Most importantly, an adequate cash position suggests that revenues are being channelized in the right direction.
Choosing 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.
Here are five of the 14 stocks that qualified the screening:
Based in Kingsport, TN, Eastman Chemical Company (EMN - Free Report) manufactures and sells materials, specialty additives, chemicals, and fibers. Expected sales growth rate for the current year is 4.9% and the stock carries a Zacks Rank #2.
SS&C Technologies Holdings, Inc. (SSNC - Free Report) provides software products and software-enabled services. This Windsor, CT-based company’s expected sales growth rate for 2018 is 99.8% and it sports a Zacks Rank #1.
AMETEK, Inc. (AME - Free Report) , headquartered in Berwyn, PA, manufactures and sells electronic instruments and electromechanical devices. Its current year expected sales growth rate is 8.4% and the stock carries a Zacks Rank #2.
Headquartered in Fremont, CA, Lam Research Corporation (LRCX - Free Report) designs, manufactures, markets, refurbishes, and services semiconductor processing equipment. The company’s expected sales growth rate for 2018 is 37.9% and it sports a Zacks Rank #1.
TransUnion (TRU - Free Report) provides risk and information solutions. This Chicago, IL-based company’s sales are expected to grow at the rate of 12.9% for 2018 and the stock carries 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 »
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Solid Sales Growth Makes These 5 Stocks Worth Considering
Strong sales growth is one of the most important characteristics of potential winners in the stock market. Companies that emphasize on sales management have a competitive advantage, as solid sales generally get converted into growth.
Sales are often more closely monitored than earnings when assessing the growth of a business. 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.
Stagnant or declining sales indicate obstacles at the company and offer limited scope for sustained growth. Stagnant companies may generate near-term profit but do not ensure enough growth to attract new investors.
Without robust sales growth, the bottom-line improvement may not be sustainable over the longer term. While a company can show earnings strength by lowering expenses, sustainable bottom-line improvement typically requires impressive sales growth.
However, sales growth in isolation doesn’t indicate much about a company’s future prospects. Though it provides investors an insight into product demand and pricing power, a huge sales number does not necessarily translate into profits.
Therefore, taking into consideration a company’s cash position along with its sales number can prove to be a more dependable strategy. Substantial cash in hand and a steady cash flow give a company more flexibility with respect to business decisions and potential investments. Most importantly, an adequate cash position suggests that revenues are being channelized in the right direction.
Choosing 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 14 stocks that qualified the screening:
Based in Kingsport, TN, Eastman Chemical Company (EMN - Free Report) manufactures and sells materials, specialty additives, chemicals, and fibers. Expected sales growth rate for the current year is 4.9% and the stock carries a Zacks Rank #2.
SS&C Technologies Holdings, Inc. (SSNC - Free Report) provides software products and software-enabled services. This Windsor, CT-based company’s expected sales growth rate for 2018 is 99.8% and it sports a Zacks Rank #1.
AMETEK, Inc. (AME - Free Report) , headquartered in Berwyn, PA, manufactures and sells electronic instruments and electromechanical devices. Its current year expected sales growth rate is 8.4% and the stock carries a Zacks Rank #2.
Headquartered in Fremont, CA, Lam Research Corporation (LRCX - Free Report) designs, manufactures, markets, refurbishes, and services semiconductor processing equipment. The company’s expected sales growth rate for 2018 is 37.9% and it sports a Zacks Rank #1.
TransUnion (TRU - Free Report) provides risk and information solutions. This Chicago, IL-based company’s sales are expected to grow at the rate of 12.9% for 2018 and the stock carries 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 »