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.
Is Envestnet (ENV) a Solid Growth Stock? 3 Reasons to Think " Yes "
Read MoreHide Full Article
Investors seek growth stocks to capitalize on above-average growth in financials that help these securities grab the market's attention and produce exceptional returns. But finding a growth stock that can live up to its true potential can be a tough task.
That's because, these stocks usually carry above-average risk and volatility. In fact, betting on a stock for which the growth story is actually over or nearing its end could lead to significant loss.
However, it's pretty easy to find cutting-edge growth stocks with the help of the Zacks Growth Style Score (part of the Zacks Style Scores system), which looks beyond the traditional growth attributes to analyze a company's real growth prospects.
Our proprietary system currently recommends Envestnet (ENV - Free Report) as one such stock. This company not only has a favorable Growth Score, but also carries a top Zacks Rank.
Research shows that stocks carrying the best growth features consistently beat the market. And returns are even better for stocks that possess the combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy).
While there are numerous reasons why the stock of this financial services firm is a great growth pick right now, we have highlighted three of the most important factors below:
Earnings Growth
Arguably nothing is more important than earnings growth, as surging profit levels is what most investors are after. For growth investors, double-digit earnings growth is highly preferable, as it is often perceived as an indication of strong prospects (and stock price gains) for the company under consideration.
While the historical EPS growth rate for Envestnet is 20%, investors should actually focus on the projected growth. The company's EPS is expected to grow 17.9% this year, crushing the industry average, which calls for EPS growth of 16.1%.
Cash Flow Growth
Cash is the lifeblood of any business, but higher-than-average cash flow growth is more beneficial and important for growth-oriented companies than for mature companies. That's because, high cash accumulation enables these companies to undertake new projects without raising expensive outside funds.
Right now, year-over-year cash flow growth for Envestnet is 30.9%, which is higher than many of its peers. In fact, the rate compares to the industry average of 10.7%.
While investors should actually consider the current cash flow growth, it's worth taking a look at the historical rate too for putting the current reading into proper perspective. The company's annualized cash flow growth rate has been 36.2% over the past 3-5 years versus the industry average of 10.9%.
Promising Earnings Estimate Revisions
Superiority of a stock in terms of the metrics outlined above can be further validated by looking at the trend in earnings estimate revisions. A positive trend is of course favorable here. Empirical research shows that there is a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
The current-year earnings estimates for Envestnet have been revising upward. The Zacks Consensus Estimate for the current year has surged 0.3% over the past month.
Bottom Line
While the overall earnings estimate revisions have made Envestnet a Zacks Rank #2 stock, it has earned itself a Growth Score of B based on a number of factors, including the ones discussed above.
Image: Bigstock
Is Envestnet (ENV) a Solid Growth Stock? 3 Reasons to Think " Yes "
Investors seek growth stocks to capitalize on above-average growth in financials that help these securities grab the market's attention and produce exceptional returns. But finding a growth stock that can live up to its true potential can be a tough task.
That's because, these stocks usually carry above-average risk and volatility. In fact, betting on a stock for which the growth story is actually over or nearing its end could lead to significant loss.
However, it's pretty easy to find cutting-edge growth stocks with the help of the Zacks Growth Style Score (part of the Zacks Style Scores system), which looks beyond the traditional growth attributes to analyze a company's real growth prospects.
Our proprietary system currently recommends Envestnet (ENV - Free Report) as one such stock. This company not only has a favorable Growth Score, but also carries a top Zacks Rank.
Research shows that stocks carrying the best growth features consistently beat the market. And returns are even better for stocks that possess the combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy).
While there are numerous reasons why the stock of this financial services firm is a great growth pick right now, we have highlighted three of the most important factors below:
Earnings Growth
Arguably nothing is more important than earnings growth, as surging profit levels is what most investors are after. For growth investors, double-digit earnings growth is highly preferable, as it is often perceived as an indication of strong prospects (and stock price gains) for the company under consideration.
While the historical EPS growth rate for Envestnet is 20%, investors should actually focus on the projected growth. The company's EPS is expected to grow 17.9% this year, crushing the industry average, which calls for EPS growth of 16.1%.
Cash Flow Growth
Cash is the lifeblood of any business, but higher-than-average cash flow growth is more beneficial and important for growth-oriented companies than for mature companies. That's because, high cash accumulation enables these companies to undertake new projects without raising expensive outside funds.
Right now, year-over-year cash flow growth for Envestnet is 30.9%, which is higher than many of its peers. In fact, the rate compares to the industry average of 10.7%.
While investors should actually consider the current cash flow growth, it's worth taking a look at the historical rate too for putting the current reading into proper perspective. The company's annualized cash flow growth rate has been 36.2% over the past 3-5 years versus the industry average of 10.9%.
Promising Earnings Estimate Revisions
Superiority of a stock in terms of the metrics outlined above can be further validated by looking at the trend in earnings estimate revisions. A positive trend is of course favorable here. Empirical research shows that there is a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
The current-year earnings estimates for Envestnet have been revising upward. The Zacks Consensus Estimate for the current year has surged 0.3% over the past month.
Bottom Line
While the overall earnings estimate revisions have made Envestnet a Zacks Rank #2 stock, it has earned itself a Growth Score of B based on a number of factors, including the ones discussed above.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
This combination indicates that Envestnet is a potential outperformer and a solid choice for growth investors.