Growth investors seek stocks that demonstrate above-average financial growth, as this characteristic attracts market attention and often leads to solid returns. However, identifying such stocks can be challenging due to their inherent risk and volatility. Selecting a stock whose growth story is nearing its end could result in significant losses. Fortunately, the Zacks Growth Style Score can help investors pinpoint cutting-edge growth stocks by analyzing a company’s true growth potential beyond conventional metrics.
One such stock currently recommended by the Zacks system is PJT Partners (PJT). PJT not only possesses a favorable Growth Score but also holds a top Zacks Rank. Studies have consistently shown that stocks with the best growth features outperform the market. Moreover, stocks boasting a combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy) tend to yield even higher returns.
Here are three key factors that make PJT Partners a compelling growth investment today:
1. Earnings Growth:
Earnings growth is arguably the most crucial factor, as stocks with exceptionally surging profits attract investor attention. For growth investors, double-digit earnings growth is highly desirable, as it often indicates strong prospects for the company and potential stock price gains. While PJT Partners’ historical EPS growth rate is 4.7%, investors should focus on the projected growth. The company’s EPS is expected to grow 33% this year, significantly surpassing the industry average of 14.4%.
2. Cash Flow Growth:
Cash is the lifeblood of any business, but higher-than-average cash flow growth is particularly beneficial for growth-oriented companies compared to mature companies. This is because strong cash accumulation allows these companies to pursue new projects without resorting to expensive external funding. Currently, PJT Partners’ year-over-year cash flow growth is 38.1%, outpacing many of its peers and exceeding the industry average of -23.2%. While investors should consider current cash flow growth, reviewing the historical rate provides valuable context. PJT’s annualized cash flow growth rate has been 14.9% over the past 3-5 years, surpassing the industry average of 11.2%.
3. Promising Earnings Estimate Revisions:
The superiority of a stock in terms of the metrics mentioned above can be further validated by examining the trend in earnings estimate revisions. A positive trend is highly favorable. Empirical research highlights a strong correlation between trends in earnings estimate revisions and near-term stock price movements. PJT Partners has experienced upward revisions in current-year earnings estimates. The Zacks Consensus Estimate for the current year has surged 8.8% over the past month.
Bottom Line:
The overall positive trend in earnings estimate revisions has earned PJT Partners a Zacks Rank #2, while its robust growth characteristics, including those discussed above, have secured it a Growth Score of A. This combination positions PJT Partners favorably for outperformance, making it an attractive investment opportunity for growth investors.
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