Growth stocks are attractive to many investors, as above-average financial growth helps these stocks easily grab the market’s attention and deliver exceptional returns. But finding a great growth stock is not at all easy.
In addition to volatility, these stocks by their nature have above average risk. Additionally, one may suffer losses from a stock whose growth story has actually ended or is nearing its end.
However, the Zacks Growth Style Score (part of the Zacks Style Score system), which looks beyond traditional growth characteristics to analyze a company’s actual growth prospects, makes it significantly easier to find cutting-edge growth stocks.
Moog (MOG.A) is currently on the list of such stocks recommended by our ownership system. In addition to a favorable Growth Score, it holds a top Zacks Rank.
Research shows that stocks with the best growth characteristics consistently outperform the market. And returns are even better for stocks that have a combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy).
While there are many reasons why this aerospace contractor’s stock is a great growth pick right now, we’ve highlighted the three most important factors below:
increase in earnings
Earnings growth is arguably the most important factor, as stocks demonstrating exceptionally growing profit levels attract the attention of most investors. And for growth investors, double-digit earnings growth is certainly preferable, and is often a sign of strong prospects (and stock price gains) for the company in question.
While the historical EPS growth rate for Moog is 18.5%, investors should really focus on projected growth. The company’s EPS are expected to grow 19.6% this year, which would shatter the industry average, which calls for EPS growth of 17%.
effective asset utilization ratio
The asset utilization ratio – also known as the sales-to-total-assets (S/TA) ratio – is often overlooked by investors, but it is an important indicator in growth investing. This metric shows how efficiently a company is using its assets to generate sales.
Right now, Moog’s S/TA ratio is 0.91, which means the company gets $0.91 in sales for every dollar in assets. Comparing this with the industry average of 0.66, it can be said that the company is more efficient.
While the level of efficiency in generating sales matters a lot, so does the sales growth of a company. And Moog is also in a good position from a sales growth standpoint. The company’s sales are expected to grow 10.2% this year, compared to the industry average of 9%.