Growth stocks are attractive to many investors because above-average financial growth makes it easy for these stocks to grab market attention and produce exceptional returns. But finding good growth stock isn’t easy at all.
In addition to volatility, these stocks by their very nature carry above-average risk. In addition, one could end up losing a title whose growth story is in fact over or nearing its end.
However, the Zacks Growth Style Score (part of the Zacks Style Scores system), which goes beyond traditional growth attributes to analyze a company’s actual growth prospects, makes it quite easy to find growth stocks of point.
Zebra Technologies (ZBRA – Free Report) is one of those actions that our proprietary system currently recommends. The company not only has a favorable growth score, but also holds a top Zacks ranking.
Studies have shown that stocks with the best growth characteristics consistently outperform the market. And for stocks that have a combination of a Growth Score of A or B and Zacks # 1 (strong buy) or 2 (buy), the returns are even better.
While there are many reasons why this manufacturer’s inventory of barcode, plastic card and RFID label printers is a great choice for growth right now, we have highlighted three of most important factors below:
Arguably, nothing is more important than earnings growth, as most investors look for rising earnings levels. For growth investors, double-digit earnings growth is highly preferable, as it is often seen as an indication of strong prospects (and share price gains) for the company under consideration.
While the historic EPS growth rate for Zebra is 25.1%, investors should actually focus on projected growth. The company’s EPS is expected to rise 42.4% this year, crushing the industry average, which calls for EPS growth of 39.1%.
Impressive asset utilization ratio
The asset utilization ratio – also known as the sales to total assets (S / TA) ratio – is often overlooked by investors, but it is an important indicator of growth investments. This metric shows how efficiently a business uses its assets to generate sales.
Right now, Zebra has an S / TA ratio of 0.98, which means the company gets $ 0.98 in sales for every dollar of assets. Comparing this to the industry average of 0.89, it can be said that the company is more efficient.
In addition to efficiency in generating sales, sales growth plays an important role. And Zebra also looks attractive from a sales growth standpoint. The company’s sales are expected to increase 26.2% this year, compared to an industry average of 17.4%.
Revisions to promising earnings estimates
Beyond the measures described above, investors should take into account the trend of revisions to earnings estimates. A positive trend is a plus here. Empirical research shows that there is a strong correlation between trends in earnings estimate revisions and short-term stock price movements.
Zebra’s current year profit estimates have been revised up. Zacks’ consensus estimate for the current year has jumped 3% over the past month.
While the overall earnings estimate revisions made Zebra a Tier 2 Zacks stock, it earned a growth score of B based on a number of factors, including those discussed above.
You can see the full list of Zacks # 1 Rank (Strong Buy) stocks today here.
This combination indicates that Zebra is a potential outperformer and a solid choice for growth investors.