Growth investors are always on the lookout for stocks that are experiencing above-average financial growth. These stocks tend to capture market attention and deliver solid returns. However, finding a truly great growth stock can be a challenging task. This is because growth stocks often carry a higher-than-average risk and volatility. Investing in a stock where the growth story is already over or nearing its end can lead to significant losses.
To navigate this challenge, the Zacks Growth Style Score provides a valuable tool. This proprietary system goes beyond traditional growth attributes to analyze a company’s true growth prospects. Industria de Diseno Textil SA (IDEXY) is one such stock that the Zacks system currently recommends. It boasts a favorable Growth Score and a top Zacks Rank.
Studies have shown that stocks with exceptional growth characteristics consistently outperform the market. For stocks that combine a Growth Score of A or B with a Zacks Rank #1 (Strong Buy) or 2 (Buy), the potential for returns is even greater.
Here are three key factors that make Industria de Diseno Textil a compelling growth pick:
Earnings Growth:
Earnings growth is often considered the most significant factor, as stocks displaying exceptional profit growth tend to attract widespread investor interest. For growth investors, double-digit earnings growth is particularly appealing. It suggests strong prospects for the company and potential stock price gains. While Industria de Diseno Textil’s historical EPS growth rate is 16.2%, investors should focus on projected growth. The company’s EPS is expected to grow 12.1% this year, surpassing the industry average of 11.9%.
Cash Flow Growth:
Cash is the lifeblood of any business, but for growth-oriented companies, higher-than-average cash flow growth is even more vital. It allows these companies to fund new projects without needing expensive outside financing. Currently, Industria de Diseno Textil’s year-over-year cash flow growth stands at 1.8%, exceeding many of its peers. This rate compares favorably to the industry average of -10.7%. While investors should consider current cash flow growth, examining historical rates can provide valuable context. Industria de Diseno Textil’s annualized cash flow growth rate has been 8.3% over the past 3-5 years, surpassing the industry average of 5.7%.
Promising Earnings Estimate Revisions:
The superiority of a stock can be further validated by observing the trend in earnings estimate revisions. A positive trend is a favorable sign. Research has shown a strong correlation between trends in earnings estimate revisions and short-term stock price movements. Earnings estimates for Industria de Diseno Textil have been trending upward for the current year. The Zacks Consensus Estimate for the current year has risen by 0.3% over the past month.
Bottom Line:
Industria de Diseno Textil’s strong earnings estimate revisions have earned it a Zacks Rank #2 stock. Coupled with its impressive Growth Score of A, driven by the factors discussed above, it is well-positioned for outperformance. Growth investors may want to consider adding this stock to their portfolio.
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