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Buy These 5 Stocks With Impressive Sales Growth Right Away
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During challenging times like these, stocks that are expected to record earnings growth in the near term will likely be difficult to find. Thus, sustained sales growth is a vital parameter for picking stocks that have the potential to generate solid returns.
Sales growth is an important metric for any company, as it is important for growth projections and helpful in strategic decision making. By keeping an eye on this key metric over multiple time periods, one can clearly understand a company’s growth trend.
In cases when companies incur loss, albeit temporarily, they are valued on the basis of revenues. Top-line growth (or decline) is usually an indicator of a company’s future earnings performance. While price-to-earnings and price-to-book value ratios can turn negative and become irrelevant, the price-to-sales ratio is available even for firms that have hit choppy waters.
A company can improve earnings by resorting to cost-control measures, while maintaining stable revenues. Nevertheless, superior profits can be achieved through steady revenue growth.
Huge sales numbers do not necessarily convert into profits. Therefore, considering a company’s cash position, in addition to sales numbers, can prove to be more prudent in the current situation. Substantial cash in hand and a steady cash flow lend a company more flexibility with respect to business decisions and investments.
Selecting Winning Stocks
In order 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 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.
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:
Keurig Dr Pepper Inc. (KDP - Free Report) — based in Burlington, MA — is a beverage and coffee company. Its expected earnings growth rate for 2020 is 13.1%. The stock currently carries a Zacks Rank #2.
Based in New York, Bristol-Myers Squibb Company (BMY - Free Report) is a one of the leading global specialty biopharmaceutical companies focused on the development of treatments targeting serious diseases. Its expected earnings growth rate for 2020 is 30.9%. The stock carries a Zacks Rank #2 at present.
Irving, TX-based Vistra Energy Corp. (VST - Free Report) is engaged in the electricity business. The company’s expected earnings growth rate for 2020 is 23.2% and it currently carries a Zacks Rank #2.
IHS Markit Ltd. — headquartered in London — is a provider of critical information, analytics and solutions to different industries. Its expected earnings growth rate for fiscal 2020 is 4.9%. The stock carries a Zacks Rank #2 at present.
Based in Camden, NJ, Campbell Soup Company (CPB - Free Report) manufactures and markets food and beverage products. Its expected earnings growth rate for fiscal 2020 is 24.8%. The stock currently 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.
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Buy These 5 Stocks With Impressive Sales Growth Right Away
During challenging times like these, stocks that are expected to record earnings growth in the near term will likely be difficult to find. Thus, sustained sales growth is a vital parameter for picking stocks that have the potential to generate solid returns.
Sales growth is an important metric for any company, as it is important for growth projections and helpful in strategic decision making. By keeping an eye on this key metric over multiple time periods, one can clearly understand a company’s growth trend.
In cases when companies incur loss, albeit temporarily, they are valued on the basis of revenues. Top-line growth (or decline) is usually an indicator of a company’s future earnings performance. While price-to-earnings and price-to-book value ratios can turn negative and become irrelevant, the price-to-sales ratio is available even for firms that have hit choppy waters.
A company can improve earnings by resorting to cost-control measures, while maintaining stable revenues. Nevertheless, superior profits can be achieved through steady revenue growth.
Huge sales numbers do not necessarily convert into profits. Therefore, considering a company’s cash position, in addition to sales numbers, can prove to be more prudent in the current situation. Substantial cash in hand and a steady cash flow lend a company more flexibility with respect to business decisions and investments.
Selecting Winning Stocks
In order 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 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.
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:
Keurig Dr Pepper Inc. (KDP - Free Report) — based in Burlington, MA — is a beverage and coffee company. Its expected earnings growth rate for 2020 is 13.1%. The stock currently carries a Zacks Rank #2.
Based in New York, Bristol-Myers Squibb Company (BMY - Free Report) is a one of the leading global specialty biopharmaceutical companies focused on the development of treatments targeting serious diseases. Its expected earnings growth rate for 2020 is 30.9%. The stock carries a Zacks Rank #2 at present.
Irving, TX-based Vistra Energy Corp. (VST - Free Report) is engaged in the electricity business. The company’s expected earnings growth rate for 2020 is 23.2% and it currently carries a Zacks Rank #2.
IHS Markit Ltd. — headquartered in London — is a provider of critical information, analytics and solutions to different industries. Its expected earnings growth rate for fiscal 2020 is 4.9%. The stock carries a Zacks Rank #2 at present.
Based in Camden, NJ, Campbell Soup Company (CPB - Free Report) manufactures and markets food and beverage products. Its expected earnings growth rate for fiscal 2020 is 24.8%. The stock currently 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