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Add These 5 Stocks With Solid Sales Growth to Your Portfolio
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Strong sales growth is one of the most important characteristics of potential winners in the stock market. The companies that give emphasis on sales management have a competitive advantage, as strong sales generally get converted into growth.
Revenues 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.
Flat or declining sales growth indicates obstacles for the company and offers limited scope for sustained growth. Stagnant companies may generate near-term profit but do not ensure enough growth to attract new investors.
Without impressive top-line growth, the bottom-line improvement may not be sustainable over the longer term. While a company can show earnings strength by lowering costs, a sustainable bottom-line growth requires robust sales growth.
However, sales growth alone doesn’t indicate much about a company’s prospects. Though it provides investors an insight into product demand and pricing power, a huge sales number is not necessarily translated into profits.
So, taking into consideration a company’s cash position and 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.
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 15 stocks that qualified the screening:
Headquartered in Burlington, MA, Keurig Dr Pepper Inc. (KDP - Free Report) operates as a beverage company. Its expected sales growth rate for 2021 is 3.7%. The stock carries a Zacks Rank #2 at present.
Stamford, CT-based Stanley Black Decker, Inc. (SWK - Free Report) manufactures and provides tools (power and hand tools) and related accessories, healthcare solutions, electronic security solutions, engineered fastening systems, along with many more items and services. The company’s expected sales growth rate for 2021 is 6.6% and it currently sports a Zacks Rank #1.
TransUnion (TRU - Free Report) — headquartered in Chicago, IL — is one of the leading global providers of risk and information solutions. Its expected sales growth rate for 2021 is 6.9%. The stock carries a Zacks Rank #2 at present.
Based in Waltham, MA, PerkinElmer, Inc. provides scientific instruments, consumables and services to pharmaceutical, biomedical, environmental testing, chemical, as well as general industrial markets. Its expected sales growth rate for 2021 is 4.2%. The stock currently sports a Zacks Rank #1.
Take-Two Interactive Software, Inc. (TTWO - Free Report) — based in New York — is a leading developer and publisher of video games. Its expected sales growth rate for 2021 is 15.9%. 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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Add These 5 Stocks With Solid Sales Growth to Your Portfolio
Strong sales growth is one of the most important characteristics of potential winners in the stock market. The companies that give emphasis on sales management have a competitive advantage, as strong sales generally get converted into growth.
Revenues 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.
Flat or declining sales growth indicates obstacles for the company and offers limited scope for sustained growth. Stagnant companies may generate near-term profit but do not ensure enough growth to attract new investors.
Without impressive top-line growth, the bottom-line improvement may not be sustainable over the longer term. While a company can show earnings strength by lowering costs, a sustainable bottom-line growth requires robust sales growth.
However, sales growth alone doesn’t indicate much about a company’s prospects. Though it provides investors an insight into product demand and pricing power, a huge sales number is not necessarily translated into profits.
So, taking into consideration a company’s cash position and 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.
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 15 stocks that qualified the screening:
Headquartered in Burlington, MA, Keurig Dr Pepper Inc. (KDP - Free Report) operates as a beverage company. Its expected sales growth rate for 2021 is 3.7%. The stock carries a Zacks Rank #2 at present.
Stamford, CT-based Stanley Black Decker, Inc. (SWK - Free Report) manufactures and provides tools (power and hand tools) and related accessories, healthcare solutions, electronic security solutions, engineered fastening systems, along with many more items and services. The company’s expected sales growth rate for 2021 is 6.6% and it currently sports a Zacks Rank #1.
TransUnion (TRU - Free Report) — headquartered in Chicago, IL — is one of the leading global providers of risk and information solutions. Its expected sales growth rate for 2021 is 6.9%. The stock carries a Zacks Rank #2 at present.
Based in Waltham, MA, PerkinElmer, Inc. provides scientific instruments, consumables and services to pharmaceutical, biomedical, environmental testing, chemical, as well as general industrial markets. Its expected sales growth rate for 2021 is 4.2%. The stock currently sports a Zacks Rank #1.
Take-Two Interactive Software, Inc. (TTWO - Free Report) — based in New York — is a leading developer and publisher of video games. Its expected sales growth rate for 2021 is 15.9%. 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