Investors are looking for growth stocks to capitalize on above-average financial growth, which helps these stocks gain market attention and generate exceptional returns. But finding a good growth stock is not at all easy.
By their very nature, these stocks carry above-average risk and volatility. Additionally, if a company’s growth story is over or nearing completion, the bet could result in a significant loss.
However, it is quite easy to find peak growth stocks using the Zacks Growth Style Score (which is part of the Zacks Style Scores system), which goes beyond traditional growth attributes to analyze growth prospects. real business.
Our proprietary system currently recommends Strategic Education (STRA) as one of these titles. This company not only has a favorable growth score, but also a higher 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.
Here are three of the most important factors that make the stock of this for-profit educational business a great growth choice right now.
Profit growth
Earnings growth is arguably the most important factor, as stocks with exceptionally high profit levels tend to grab the attention of most investors. And for growing investors, double-digit earnings growth is certainly preferable, and often an indication of strong prospects (and stock price gains) for the company in question.
While the historic EPS growth rate for strategic education is 11.2%, investors should actually focus on the expected growth. The company’s EPS is expected to grow 14.7% this year, crushing the industry average, which forecasts EPS growth of 9.7%.
Cash flow growth
While cash flow is the lifeblood of any business, above-average cash flow growth is more important and beneficial for growth-oriented businesses than for mature businesses. Indeed, the growth in cash flows allows these companies to develop their activities without depending on expensive external funds.
Currently, year-over-year cash flow growth for strategic education is 96.7%, which is higher than that of many of its peers. In fact, the rate compares to the industry average of 1.2%.
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 company’s annualized cash flow growth rate has been 31.7% in the past 3 to 5 years, compared to an industry average of 12.6%.
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.
The current year’s revenue estimates for Strategic Education have been revised upwards. Zacks’ consensus estimate for the current year has jumped 3.4% in the past month.
Bottom Line
Although the overall revisions to the profit estimate made strategic education a Zacks rank 2 title, they earned a growth score of B based on a number of factors, including those discussed above.
You can see the full list of today’s Zacks # 1 Rank (Strong Buy) stocks here.
This combination positions strategic education well for outperformance, so growth investors may want to bet on it.
Click to get this free report
Strategic Education Inc. (STRA): Free stock analysis report
To read this article on Zacks.com, click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Investors are looking for growth stocks to capitalize on above-average financial growth, which helps these stocks gain market attention and generate exceptional returns. But finding a good growth stock is not at all easy.
By their very nature, these stocks carry above-average risk and volatility. Additionally, if a company’s growth story is over or nearing completion, the bet could result in a significant loss.
However, it is quite easy to find peak growth stocks using the Zacks Growth Style Score (which is part of the Zacks Style Scores system), which goes beyond traditional growth attributes to analyze growth prospects. real business.
Our proprietary system currently recommends Strategic Education (STRA) as one of these titles. This company not only has a favorable growth score, but also a higher 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.
Here are three of the most important factors that make the stock of this for-profit educational business a great growth choice right now.
Profit growth
Earnings growth is arguably the most important factor, as stocks with exceptionally high profit levels tend to grab the attention of most investors. And for growing investors, double-digit earnings growth is certainly preferable, and often an indication of strong prospects (and stock price gains) for the company in question.
While the historic EPS growth rate for strategic education is 11.2%, investors should actually focus on the expected growth. The company’s EPS is expected to grow 14.7% this year, crushing the industry average, which forecasts EPS growth of 9.7%.
Cash flow growth
While cash flow is the lifeblood of any business, above-average cash flow growth is more important and beneficial for growth-oriented businesses than for mature businesses. Indeed, the growth in cash flows allows these companies to develop their activities without depending on expensive external funds.
Currently, year-over-year cash flow growth for strategic education is 96.7%, which is higher than that of many of its peers. In fact, the rate compares to the industry average of 1.2%.
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 company’s annualized cash flow growth rate has been 31.7% in the past 3 to 5 years, compared to an industry average of 12.6%.
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.
The current year’s revenue estimates for Strategic Education have been revised upwards. Zacks’ consensus estimate for the current year has jumped 3.4% in the past month.
Bottom Line
Although the overall revisions to the profit estimate made strategic education a Zacks rank 2 title, they earned a growth score of B based on a number of factors, including those discussed above.
You can see the full list of today’s Zacks # 1 Rank (Strong Buy) stocks here.
This combination positions strategic education well for outperformance, so growth investors may want to bet on it.
Click to get this free report
Strategic Education Inc. (STRA): Free stock analysis report
To read this article on Zacks.com, click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.