5 Best Stocks With Solid Sales Growth To Keep An Eye On

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 monitoring this key metric over multiple time periods, one can 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 an unprofitable business and dismal financial performance. Stagnant companies may generate near-term profit, but can’t register enough growth to attract new investors.

Also, in a growing economy, lack of sales growth shows that the company is not gaining market share over its competitors. In simple terms, some sustained sales growth is necessary 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 investment strategy.

Substantial cash on hand and a steady cash flow provide the company with more flexibility in relation to business decisions and potential investments. Cash also enables a company to endure market downturns. Most importantly, a sufficient cash position indicates that revenues are being channelized in the right direction.

Choosing the 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 greater 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.

Price-to-Sales (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 (4 Weeks) greater than X-Industry: Better-than-industry estimate revision has often been seen to trigger an increase in the stock price.

Operating Margin (Average Last 5 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 the company.

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 nine stocks that qualified the screening:

Based in Bethesda, MD, CBRE Group, Inc. (NYSE:CBG) operates as a commercial real estate services and investment company. The company has expected sales growth rate of 6.9% for the current year and carries a Zacks Rank #2.

Raymond James Financial, Inc. (NYSE:RJF) engages in the underwriting, distribution, trading, and brokerage of equity and debt securities, and the sale of mutual funds and other investment products. This St. Petersburg, FL-based stock has expected sales growth rate of 11.2% for fiscal 2018 and carries a Zacks Rank #2.

Huntington Ingalls Industries, Inc. (NYSE:HII) , based in Newport News, VA, is engaged in designing, building, overhauling, and repairing ships. Its current year expected sales growth rate is 4.5% and the stock carries a Zacks Rank #2.

Headquartered in Detroit, MI, DTE Energy Company (NYSE:DTE) is engaged in utility operations. The company has expected sales growth rate of 5.4% for this year and carries a Zacks Rank #2.

AMETEK, Inc. (NYSE:AME) manufactures electronic instruments and electromechanical devices. This Berwyn, PA-based company’s current year sales are expected to grow at the rate of 10.6% and the stock has 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

Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »

DTE Energy Company (DTE): Free Stock Analysis Report

Huntington Ingalls Industries, Inc. (HII): Free Stock Analysis Report

Raymond James Financial, Inc. (RJF): Free Stock Analysis Report

CBRE Group, Inc. (CBG): Free Stock Analysis Report

AMTEK, Inc. (AME): Free Stock Analysis Report

Original post

Zacks Investment Research