Back to top

Image: Bigstock

Add These 5 Stocks With Strong Sales Growth to Your Portfolio

Read MoreHide Full Article

Sales growth is an important metric for any company, as it is a vital part of growth projections and instrumental in strategic decision-making. By keeping an eye on this key metric over a significant period of time, one can clearly understand a company’s growth trend.

Sales growth is essential to justify the fixed and variable expenses incurred to operate a business. Low revenues lead to unprofitable business and hamper financials. Stagnant companies may generate near-term profit but can’t generate enough growth to attract new investors.

Also, in a growing economy, lack of sales growth most likely reflects that the company is not gaining market share over its peers. In simple terms, some sustained sales growth is required to support the bottom line.

Focusing solely on sales growth is not enough though. A healthy sales growth rate is certainly a positive indicator for picking good stocks but it does not ensure profits. So, taking into consideration a company’s cash position along with its sales number can prove to be a more dependable strategy.

Substantial cash on hand and a steady cash flow give a company more flexibility with respect to business decisions and potential investments. Cash also enables a company to endure market downturns. A strong liquidity position indicates that revenues are being channelized in the right direction.

Selecting 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 more 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.

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 for it.

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 17 stocks that qualified the screening:    

Nexstar Media Group, Inc. (NXST - Free Report) , based in Irving, TX, is a television broadcasting and digital media company. Its expected sales growth rate for 2020 is 53.7%. The stock sports a Zacks Rank #1.

Based in Evansville, IN, Berry Global Group, Inc. (BERY - Free Report) manufactures and supplies non-woven, flexible, and rigid products. Expected sales growth rate for fiscal 2020 is 38.9%. The stock sports a Zacks Rank #1.

Denver, CO, DCP Midstream, LP owns, operates, acquires, and develops a portfolio of midstream energy assets. The company’s expected sales growth rate for 2020 is 27%  and it carries a Zacks Rank #2.

Huntington Ingalls Industries, Inc. (HII - Free Report) , headquartered in Newport News, VA, is engaged in designing, building, overhauling, and repairing military ships. Its expected sales growth rate for 2020 is 3.6%, and the stock sports a Zacks Rank #1.

FleetCor Technologies, Inc. provides commercial payment solutions. This Peachtree Corners, GA-based company’s sales are expected to increase 10.6% in 2020. 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

Published in