When investors are looking for growth stocks, they are seeking securities that have the potential for above-average growth in their financials. These stocks are attractive because they can capture the market’s attention and deliver exceptional returns. However, finding a great growth stock is not always easy.
Growth stocks typically come with above-average risk and volatility. Investing in a stock where the growth story is already over or nearing its end can result in significant losses. This is why it is important to identify cutting-edge growth stocks that have real growth prospects.
One way to do this is by using the Zacks Growth Style Score, which is part of the Zacks Style Scores system. This system goes beyond traditional growth attributes to analyze a company’s true growth potential. Abercrombie & Fitch (ANF) is one such stock that is currently recommended by our proprietary system. Not only does the company have a favorable Growth Score, but it also boasts a top Zacks Rank.
Research has shown that stocks with strong growth features consistently outperform the market. When a stock has a Growth Score of A or B and a Zacks Rank of #1 (Strong Buy) or 2 (Buy), the returns are even better.
There are three key factors that make Abercrombie & Fitch a great growth pick right now:
1. Earnings Growth: Earnings growth is crucial for investors, as rising profit levels indicate strong prospects for a company. Abercrombie has a historical EPS growth rate of 26.5%, and is expected to grow by 47.5% this year, surpassing the industry average of 14.2%.
2. Cash Flow Growth: High cash flow growth is essential for growth-oriented companies. Abercrombie’s year-over-year cash flow growth is 225.2%, higher than many of its peers and the industry average of -20.8%. The company’s annualized cash flow growth rate over the past 3-5 years has been 14.8%, compared to the industry average of 5.7%.
3. Promising Earnings Estimate Revisions: Positive trends in earnings estimate revisions can further validate a stock’s superiority. Abercrombie has seen upward revisions in current-year earnings estimates, with the Zacks Consensus Estimate for the current year increasing by 22.8% over the past month.
In conclusion, Abercrombie & Fitch has earned a Zacks Rank #1 and a Growth Score of B, making it a potential outperformer and a solid choice for growth investors.