Growth investors focus on stocks that are seeing above-average financial growth, as this feature helps these securities garner the market’s attention and deliver solid returns. However, it isn’t easy to find a great growth stock.
By their very nature, these stocks carry above-average risk and volatility. Moreover, if a company’s growth story is over or nearing its end, betting on it could lead to significant loss.
However, it’s pretty easy to find cutting-edge growth stocks with the help of the Zacks Growth Style Score (part of the
Zacks Style Scores
system), which looks beyond the traditional growth attributes to analyze a company’s real growth prospects.
Our proprietary system currently recommends Kinross Gold (KGC) as one such stock. This company not only has a favorable Growth Score, but also carries a top Zacks Rank.
Research shows that stocks carrying the best growth features consistently beat the market. And returns are even better for stocks that possess the combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy).
While there are numerous reasons why the stock of this gold mining company is a great growth pick right now, we have highlighted three of the most important factors below:
Earnings Growth
Earnings growth is arguably the most important factor, as stocks exhibiting exceptionally surging profit levels tend to attract the attention of most investors. And for growth investors, double-digit earnings growth is definitely preferable, and often an indication of strong prospects (and stock price gains) for the company under consideration.
While the historical EPS growth rate for Kinross Gold is 63.9%, investors should actually focus on the projected growth. The company’s EPS is expected to grow 107.6% this year, crushing the industry average, which calls for EPS growth of 41.7%.
Impressive Asset Utilization Ratio
Asset utilization ratio — also known as sales-to-total-assets (S/TA) ratio — is often overlooked by investors, but it is an important indicator in growth investing. This metric exhibits how efficiently a firm is utilizing its assets to generate sales.
Right now, Kinross Gold has an S/TA ratio of 0.4, which means that the company gets $0.4 in sales for each dollar in assets. Comparing this to the industry average of 0.27, it can be said that the company is more efficient.
In addition to efficiency in generating sales, sales growth plays an important role. And Kinross Gold looks attractive from a sales growth perspective as well. The company’s sales are expected to grow 19.3% this year versus the industry average of 17.4%.
Promising Earnings Estimate Revisions
Superiority of a stock in terms of the metrics outlined above can be further validated by looking at the trend in earnings estimate revisions. A positive trend is of course favorable here. Empirical research shows that there is a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
There have been upward revisions in current-year earnings estimates for Kinross Gold. The Zacks Consensus Estimate for the current year has surged 4.2% over the past month.
Bottom Line
Kinross Gold has not only earned a Growth Score of B based on a number of factors, including the ones discussed above, but it also carries a Zacks Rank #2 because of the positive earnings estimate revisions.
You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
This combination positions Kinross Gold well for outperformance, so growth investors may want to bet on it.
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