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Add These 5 Strong Sales Growth Stocks to Your Portfolio Now
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When it comes to picking stocks, investors often opt for complex investment strategies to generate higher returns. But with ever-changing market dynamics, this may not yield desired results every time. So, using conventional strategies based on key fundamentals to choose stocks is always wise.
One such strategy is sales growth. Maintaining steady sales growth is the key to survival for any business. Sales growth remains a vital measure for any corporate house, as it is important for growth projections and strategic decision-making.
Hence, when companies incur losses for a temporary period, they are valued based on their revenues, as top-line growth (or decline) is usually an indicator of a company’s future earnings performance. Also, in contrast to price to earnings and price to book value ratios, which can turn negative and cease to be relevant, price-to-sales (P/S) ratio is available even for companies that have hit choppy waters.
Further, profits and book value are primarily influenced by several factors. However, management has limited opportunities to manipulate sales, which further underscores the importance of P/S ratio. Therefore, P/S ratio can serve as a more reliable metric for stock valuation.
Focusing solely on sales growth is, however, not enough. Consideration of a company’s cash position along with its sales can be a more dependable strategy. Significant cash in hand and steady cash flow give a company more flexibility with respect to business decisions and investments.
Choosing the 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 27 stocks that qualified the screening:
Minneapolis, MN-based Target Corporation (TGT - Free Report) has evolved from just being a pure brick-&-mortar retailer to an omni-channel entity. TGT has been investing in technologies, improving websites and mobile apps and modernizing the supply chain to keep pace with the changing retail landscape and better compete with pure e-commerce players.
Target’s expected sales growth rate for fiscal 2022 is 14.3%. The stock currently carries a Zacks Rank #2.
Based in Clayton, MO, Olin Corporation (OLN - Free Report) is a vertically-integrated global producer and distributor of chemical products and U.S. maker of ammunition. Internationally, OLN operates in regions like Latin America, the Asia-Pacific and Europe.
Olin’s expected sales growth rate for 2021 is 53.5%. It currently sports a Zacks Rank #1.
Headquartered in Houston, TX, Callon Petroleum Company focuses on the exploration and production of oil and gas resources in the Permian Basin. Among the three major sub-basins of Permian — Midland Basin, Delaware Basin and Central Basin Platform — CPE has a strong footprint in the Midland and Delaware Basins.
Callon Petroleum’s sales are expected to surge 72.5% for 2021. The stock sports a Zacks Rank #1 at present.
Based in Chicago, IL, Cboe Global Markets, Inc. (CBOE - Free Report) is one of the largest stock exchange operators by volume in the United States and a leading market globally for ETP trading. Cboe’s trading venues include the largest options exchange in the United States and the largest stock exchange by value traded in Europe.
Cboe’s expected sales growth rate for 2021 is 15.6%. The stock carries a Zacks Rank #2 at present.
Saskatoon, Canada-based Nutrien Ltd. (NTR - Free Report) is a leading integrated provider of crop inputs and services. NTR produces three crop nutrients — potash, nitrogen and phosphate.
Nutrien’s expected sales growth rate for 2021 is 26.7%. The stock sports a Zacks Rank #1 at present.
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 Strong Sales Growth Stocks to Your Portfolio Now
When it comes to picking stocks, investors often opt for complex investment strategies to generate higher returns. But with ever-changing market dynamics, this may not yield desired results every time. So, using conventional strategies based on key fundamentals to choose stocks is always wise.
One such strategy is sales growth. Maintaining steady sales growth is the key to survival for any business. Sales growth remains a vital measure for any corporate house, as it is important for growth projections and strategic decision-making.
Hence, when companies incur losses for a temporary period, they are valued based on their revenues, as top-line growth (or decline) is usually an indicator of a company’s future earnings performance. Also, in contrast to price to earnings and price to book value ratios, which can turn negative and cease to be relevant, price-to-sales (P/S) ratio is available even for companies that have hit choppy waters.
Further, profits and book value are primarily influenced by several factors. However, management has limited opportunities to manipulate sales, which further underscores the importance of P/S ratio. Therefore, P/S ratio can serve as a more reliable metric for stock valuation.
Focusing solely on sales growth is, however, not enough. Consideration of a company’s cash position along with its sales can be a more dependable strategy. Significant cash in hand and steady cash flow give a company more flexibility with respect to business decisions and investments.
Choosing the 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 27 stocks that qualified the screening:
Minneapolis, MN-based Target Corporation (TGT - Free Report) has evolved from just being a pure brick-&-mortar retailer to an omni-channel entity. TGT has been investing in technologies, improving websites and mobile apps and modernizing the supply chain to keep pace with the changing retail landscape and better compete with pure e-commerce players.
Target’s expected sales growth rate for fiscal 2022 is 14.3%. The stock currently carries a Zacks Rank #2.
Based in Clayton, MO, Olin Corporation (OLN - Free Report) is a vertically-integrated global producer and distributor of chemical products and U.S. maker of ammunition. Internationally, OLN operates in regions like Latin America, the Asia-Pacific and Europe.
Olin’s expected sales growth rate for 2021 is 53.5%. It currently sports a Zacks Rank #1.
Headquartered in Houston, TX, Callon Petroleum Company focuses on the exploration and production of oil and gas resources in the Permian Basin. Among the three major sub-basins of Permian — Midland Basin, Delaware Basin and Central Basin Platform — CPE has a strong footprint in the Midland and Delaware Basins.
Callon Petroleum’s sales are expected to surge 72.5% for 2021. The stock sports a Zacks Rank #1 at present.
Based in Chicago, IL, Cboe Global Markets, Inc. (CBOE - Free Report) is one of the largest stock exchange operators by volume in the United States and a leading market globally for ETP trading. Cboe’s trading venues include the largest options exchange in the United States and the largest stock exchange by value traded in Europe.
Cboe’s expected sales growth rate for 2021 is 15.6%. The stock carries a Zacks Rank #2 at present.
Saskatoon, Canada-based Nutrien Ltd. (NTR - Free Report) is a leading integrated provider of crop inputs and services. NTR produces three crop nutrients — potash, nitrogen and phosphate.
Nutrien’s expected sales growth rate for 2021 is 26.7%. The stock sports a Zacks Rank #1 at present.
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