Growth stocks are attractive to many investors, as above-average financial growth helps these stocks easily grab the market’s attention and produce exceptional returns. However, it isn’t easy to find a great growth stock.<\/p>\n
In addition to volatility, these stocks carry above-average risk by their very nature. Also, one could end up losing from a stock whose growth story is actually over or nearing its end.<\/p>\n
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.<\/p>\n
ABB (ABBNY) is on the list of such stocks currently recommended by our proprietary system. In addition to a favorable Growth Score, it carries a top Zacks Rank.<\/p>\n
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).<\/p>\n
While there are numerous reasons why the stock of this industrial automation company is a great growth pick right now, we have highlighted three of the most important factors below:<\/p>\n
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.<\/p>\n
While the historical EPS growth rate for ABB is 20.7%, investors should actually focus on the projected growth. The company’s EPS is expected to grow 27.6% this year, crushing the industry average, which calls for EPS growth of 10.1%.<\/p>\n
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.<\/p>\n
Right now, year-over-year cash flow growth for ABB is 13.4%, which is higher than many of its peers. In fact, the rate compares to the industry average of 9.3%.<\/p>\n
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 12.4% over the past 3-5 years versus the industry average of 11.1%.<\/p>\n
Beyond the metrics outlined above, investors should consider the trend in earnings estimate revisions. A positive trend is a plus here. Empirical research shows that there is a strong correlation between trends in earnings estimate revisions and near-term stock price movements.<\/p>\n
There have been upward revisions in current-year earnings estimates for ABB. The Zacks Consensus Estimate for the current year has surged 0.3% over the past month.<\/p>\n
ABB has not only earned a Growth Score of B based on a number of factors, including the ones discussed above, but it also carries a Zacks Rank #2 because of the positive earnings estimate revisions.<\/p>\n
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.<\/p>\n
This combination indicates that ABB is a potential outperformer and a solid choice for growth investors.<\/p>\n
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report<\/a><\/p>\n ABB Ltd (ABBNY) : Free Stock Analysis Report<\/a><\/p>\n This article originally published on Zacks Investment Research (zacks.com).<\/a><\/p>\n