5 Stocks With Solid Sales Growth to Protect Against Market Troubles – Zacks Investment Research | Jewelry Dukan

Since early 2022, markets have borne the brunt of macroeconomic and geopolitical ambiguity. Faced with such serious concerns, investors are cautious about entering the market. However, at such times, a conventional stock-picking strategy would make sense to generate robust returns.

One such method is to pick stocks with steady revenue growth. In this regard, stocks like PepsiCo Inc. (PEP free report) UFP Industries, Inc. (UFPI free report) Carlisle Companies Incorporated (csl free report) Broadridge Financial Solutions, Inc. (BR Free report) and Silgan Holdings Inc. (SLGN Free Report) are worth a look.

When evaluating a company, revenue is often monitored more than revenue. This is because investors want to ensure a company’s ability to generate more revenue over time to service a growing customer base. Stable or declining sales growth indicates obstacles in the company. Stagnant companies can generate profits in the short term, but they don’t generate enough growth to attract new investors.

Without solid revenue growth, improving the bottom line may not be sustainable over the long term. While a company can demonstrate profitability by cutting costs, continually improving the bottom line typically requires robust revenue growth.

Therefore, the price-to-sales (P/E) ratio can prove to be a good metric for evaluating stocks. It remains a key stock selection criterion given that management typically has limited ability to manipulate returns as well as profits. Thus, the P/E ratio is less manipulable than the price/earnings ratio.

However, revenue growth alone doesn’t say much about a company’s future performance. Therefore, considering a company’s liquidity along with its sales number can prove to be a more reliable investment strategy. Having a large cash balance and steady cash flow gives a company more flexibility in terms of business decisions and potential investments.

Selection of potential winning stocks

For the shortlist we have selected stocks with impressive sales growth and a high cash position Historical 5-year sales growth (%) greater than X-Industry and Cash flow in excess of $500 million as our main screening parameters.

But revenue growth and cash strength aren’t absolute criteria for stock picking. So we added more factors to arrive at a winning strategy.

P/S ratio smaller than X-Industry: This metric determines the value placed on every dollar of a company’s revenue. The lower the ratio, the better a stock to pick since the investor pays less for each unit of sale.

% Change in F1 Sales Estimate Revisions (four weeks) greater than X-Industry: Estimate revisions, better than the industry, are often seen as triggers for stock prices to rise.

Operating margin (last five year average) greater than 5%: Operating margin measures how much each dollar of a company’s sales converts into profits. A high ratio indicates that the company has good cost control and sales are growing faster than costs – an optimal situation.

Return on Equity (ROE) greater than 5%: This metric ensures that sales growth is being translated into profits and the company is not hoarding cash. A high ROE means the company is investing wisely and is likely to be profitable.

Zacks rank less than or equal to 2: Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks are known for outperforming regardless of the market environment. You can see the full list of today’s Zacks #1 Rank stocks can be found here.

Here are five of the 18 stocks that qualified for screening:

Headquartered in Purchase, NY, PepsiCo is one of the world’s leading food and beverage companies. PEP’s complementary brands/companies include Frito-Lay snacks, Pepsi-Cola beverages, Gatorade sports drinks, Tropicana juices and Quaker foods.

PepsiCo’s expected revenue growth rate for 2022 is 5.6%. The stock currently carries a Zacks rank of #2.

Based in Grand Rapids, MI, UFP Industries is a holding company with subsidiaries throughout North America, Europe, Asia and Australia. UFPI supplies wood, wood composites and other products to the retail, industrial and home improvement markets.

UFP Industries revenue is expected to grow 11.4% in 2022. The stock currently has a Zacks rank of #1.

Based in Scottsdale, Arizona, Carlisle is a diversified, global portfolio of niche brands and companies with advanced, high-margin products. CSL is engaged in the design, manufacture and sale of a wide range of roofing and waterproofing products, engineered products and finishing equipment.

Carlisle’s expected revenue growth for 2022 is 39.4%. The company currently has a #1 Zacks rank.

Broadridge Financial, based in Lake Success, NY, is a global financial technology company providing investor communications and technology-centric solutions. BR is a leading producer and distributor of a variety of documents widely used in the financial industry, including powers of attorney, annual reports, prospectuses and trade confirmations.

Broadridge Financial’s expected revenue growth rate for fiscal 2023 is 7.5%. The stock currently has a Zacks rank of #2.

Headquartered in Stamford, Connecticut, Silgan Holdings is a leading provider of rigid packaging for consumer products. SLGN is the largest supplier of metal food containers in North America.

Silgan Holdings’ expected revenue growth rate for 2022 is 12.8%. The stock currently carries a Zacks rank of #2.

Get the rest of the stocks on the list and start testing these and other ideas. All of this can be done using Research Wizard stock selection and backtesting software.

The research assistant is a great place to start. It’s easy to use. Everything in plain language. And it’s very intuitive. Start your Research Wizard trial today. And the next time you’re reading an economic report, open up the research assistant, plug in your finds, and see what gems come out.

Click here to sign up for a free trial of Research Wizard today.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options mentioned in this material.

Disclosure: Performance information on Zacks portfolios and strategies is available at: https://www.zacks.com/performance

Leave a Comment