Growing investors focus on stocks that are experiencing above average financial growth, as this feature helps these stocks gain market attention and generate solid returns. But finding a growth stock that lives up to its true potential can be a difficult task.
In addition to volatility, these stocks carry an above average risk by their very nature. Additionally, one could end up losing from a stock whose growth history is actually above or near its end.
However, the task of finding peak growth stocks is made easier with the Zacks Growth Style Score (part of the Zacks Style Scores system), which goes beyond traditional growth attributes to analyze growth prospects. real business.
Ensign Group (ENSG) is on the list of these stocks currently recommended by our proprietary system. In addition to a favorable growth score, it has the best Zacks ranking.
Research shows that stocks with the best growth characteristics regularly beat the market. And for stocks that have a combination of a growth score of A or B and a rank 1 of Zacks (strong buy) or 2 (buy), the returns are even better.
While there are many reasons why the stock of this nursing and rehab service provider is a great growth choice right now, we have highlighted three of the most important factors below:
You could argue that nothing is more important than earnings growth, because rising profit levels are what most investors are looking for. For growing investors, double-digit earnings growth is highly preferable, as it is often seen as an indication of a solid outlook (and stock price gains) for the company in question.
While the historical EPS growth rate for Ensign Group is 14.6%, investors should actually focus on the expected growth. The company’s EPS is expected to grow 13.7% this year, crushing the industry average, which forecasts EPS growth of -66.2%.
Cash flow growth
Cash is the lifeblood of any business, but above-average cash flow growth is more beneficial and important for growth-oriented businesses than for mature businesses. Indeed, a large accumulation of liquidity allows these companies to undertake new projects without raising expensive external funds.
Today’s year-over-year cash flow growth for Ensign Group is 18.2%, which is higher than that of many of its peers. In fact, the rate compares to the industry average of -7.3%.
While investors should actually take into account the current growth in cash flow, it is also worth taking a look at the historical rate to put the current reading in perspective. The annualized growth rate of the company’s cash flows has been 16.9% over the past 3 to 5 years compared to an industry average of -6.5%.
Promising revisions to the earnings estimate
Beyond the measures described above, investors should take into account the trend of revisions to profit estimates. A positive trend is a plus here. Empirical research shows that there is a strong correlation between trends in revisions to earnings estimates and short-term movements in stock prices.
There have been upward revisions to the profit estimates for the current year for Ensign Group. Zacks’ consensus estimate for the current year jumped 0.1% in the past month.
Although overall revisions to the profit estimate made the Ensign group a Zacks second-tier title, it itself achieved an A growth score based on a number of factors, including those discussed above. above.
You can see the full list of today’s Zacks # 1 Rank (Strong Buy) stocks here.
This combination indicates that Ensign Group is a potential outperformer and a solid choice for growing investors.
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