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

Investors often overlook sales growth while picking stocks, as a company’s stock price is generally sensitive to its earnings momentum. However, earnings are quite vulnerable in the sense that books can be easily cooked and inflated. That’s why sales must always be taken into consideration while making any investment decision.

Sales growth is actually an important indicator of a company's health and ability to sustain its business. It provides investors an insight into product demand and pricing power. The main advantage is that the sales figure is generally not manipulated and is less volatile than earnings.

Without some top-line growth, the bottom-line improvement may not be sustainable in the long term. While a company can show earnings strength by reducing expenses, a sustainable bottom-line recovery usually requires sales growth.

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. Therefore, taking into consideration a company’s cash position along with its sales number can prove to be a more dependable strategy.

Substantial cash on hand and a steady cash flow give a company more flexibility with respect 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.

Selecting 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 more 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.

1 2 3
View single page >> |

Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

more
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.