Investors seek growth stocks to capitalize on above-average growth in financials that help these securities grab the market’s attention and produce exceptional returns. However, it isn’t easy to find a great growth stock.
That’s because, these stocks usually carry above-average risk and volatility. In fact, betting on a stock for which the growth story is actually over or nearing its end could lead to significant loss.
However, the Zacks Growth Style Score (part of the Zacks Style Scores system), which looks beyond the traditional growth attributes to analyze a company’s real growth prospects, makes it pretty easy to find cutting-edge growth stocks.
Alexander & Baldwin Holdings, Inc. (ALEX) is one such stock that our proprietary system currently recommends. The company not only has a favorable Growth Score, but also carries a top Zacks Rank.
Research shows that stocks carrying the best growth features consistently beat the market. And returns are even better for stocks that possess the combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Here are three of the most important factors that make the stock of this company a great growth pick right now.
Earnings growth is arguably the most important factor, as stocks exhibiting exceptionally surging profit levels tend to attract the attention of most investors. For growth investors, double-digit earnings growth is highly preferable, as it is often perceived as an indication of strong prospects (and stock price gains) for the company under consideration.
While the historical EPS growth rate for Alexander & Baldwin Holdings is 15.3%, investors should actually focus on the projected growth. The company’s EPS is expected to grow 15.1% this year, crushing the industry average, which calls for EPS growth of 1.2%.
While cash is the lifeblood of any business, higher-than-average cash flow growth is more important and beneficial for growth-oriented companies than for mature companies. That’s because, growth in cash flow enables these companies to expand their businesses without depending on expensive outside funds.
Right now, year-over-year cash flow growth for Alexander & Baldwin Holdings is 0.5%, which is higher than many of its peers. In fact, the rate compares to the industry average of -4.7%.
While investors should actually consider the current cash flow growth, it’s worth taking a look at the historical rate too for putting the current reading into proper perspective. The company’s annualized cash flow growth rate has been 35.7% over the past 3-5 years versus the industry average of 2.3%.
