Growth investors are on the prowl for stocks that exhibit above-average financial growth, as this characteristic typically garners the market’s attention and yields substantial returns. However, the hunt for a great growth stock is no easy feat. These stocks often come with elevated risk and volatility, and wagering on a stock with a growth story on its last legs could result in significant losses.
Nevertheless, with the Zacks Growth Style Score, we can easily identify cutting-edge growth stocks that hold significant potential. Eagle Materials (EXP) is one such stock that our proprietary system currently recommends, boasting a favorable Growth Score and a top Zacks Rank.
Research has shown that stocks with the best growth features consistently outperform the market. Furthermore, stocks with a Growth Score of A or B and a Zacks Rank of #1 (Strong Buy) or 2 (Buy) tend to deliver even better returns.
Earnings Growth
Earnings growth is undeniably crucial, as stocks with remarkably surging profit levels tend to captivate the interest of most investors. For growth investors, double-digit earnings growth is the preference, often signaling robust prospects and stock price gains for the company at hand.
While Eagle Materials boasts a historical EPS growth rate of 28%, investors should place their focus on the projected growth, with the company’s EPS expected to soar by 13.8% this year, surpassing the industry average of 13.1%.
Cash Flow Growth
Cash flow is the lifeblood of any business, and higher-than-average cash flow growth holds greater significance for growth-oriented companies than for mature companies. This growth enables companies to expand their operations without relying on expensive external funds.
Currently, Eagle Materials boasts a year-over-year cash flow growth of 17.2%, surpassing many of its peers and the industry average of 9.4%. Additionally, the company’s annualized cash flow growth rate over the past 3-5 years stands at 13.6%, compared to the industry average of 4.5%.
Promising Earnings Estimate Revisions
The validation of a stock’s superiority, as per the aforementioned metrics, can be further substantiated by examining the trend in earnings estimate revisions—a favorable trend is certainly advantageous. Empirical research indicates a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
Eagle Materials’ current-year earnings estimates have been undergoing upward revisions, with the Zacks Consensus Estimate for the current year surging 0.7% over the past month.
Bottom Line
Amidst the various overall earnings estimate revisions making Eagle Materials a Zacks Rank #2 stock, it has also secured a Growth Score of B based on several factors, including those discussed above. This combination positions Eagle Materials as a potential outperformer and a solid choice for growth investors.
Zacks Names #1 Semiconductor Stock
While we uncover promising growth prospects in Eagle Materials (EXP), it’s also important to stay informed about other lucrative sectors. Semiconductor stocks continue to dominate the market, and with strong earnings growth and an expanding customer base, one particular semiconductor stock stands out—offering substantial room for future growth.
With the increasing demand for Artificial Intelligence, Machine Learning, and Internet of Things, global semiconductor manufacturing is projected to skyrocket from $452 billion in 2021 to a staggering $803 billion by 2028.
Interested in exploring this stock further? Get a free insight now and stay updated with the latest recommendations from Zacks Investment Research.
