3 Reasons Growth Investors Will Love Nvidia (NVDA)
Growth investors focus on stocks that are seeing above-average financial growth, as this feature helps these securities garner the market’s attention and deliver solid returns. But finding a great growth stock is not easy at all.
That’s because, these stocks usually carry above-average risk and volatility. In fact, betting on a stock for which the growth story is actually over or nearing its end could lead to significant loss.
However, the task of finding cutting-edge growth stocks is made easy with the help of 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.
Nvidia (NVDA) is one such stock that our proprietary system currently recommends. The company not only has a favorable Growth Score, but also carries a top Zacks Rank.
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).
Here are three of the most important factors that make the stock of this maker of graphics chips for gaming and artificial intelligence a great growth pick right now.
Earnings Growth
Arguably nothing is more important than earnings growth, as surging profit levels is what most investors are after. 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.
While the historical EPS growth rate for Nvidia is 39.9%, investors should actually focus on the projected growth. The company’s EPS is expected to grow 264.5% this year, crushing the industry average, which calls for EPS growth of -12.1%.
Impressive Asset Utilization Ratio
Growth investors often overlook asset utilization ratio, also known as sales-to-total-assets (S/TA) ratio, but it is an important feature of a real growth stock. This metric shows how efficiently a firm is utilizing its assets to generate sales.
Right now, Nvidia has an S/TA ratio of 0.95, which means that the company gets $0.95 in sales for each dollar in assets. Comparing this to the industry average of 0.67, it can be said that the company is more efficient.
In addition to efficiency in generating sales, sales growth plays an important role. And Nvidia is well positioned from a sales growth perspective too. The company’s sales are expected to grow 115.1% this year versus the industry average of -7%.
Promising Earnings Estimate Revisions
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.
The current-year earnings estimates for Nvidia have been revising upward. The Zacks Consensus Estimate for the current year has surged 14.6% over the past month.
Bottom Line
Nvidia has not only earned a Growth Score of A 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.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
This combination positions Nvidia well for outperformance, so growth investors may want to bet on it.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s credited with a “watershed medical breakthrough” and is developing a bustling pipeline of other projects that could make a world of difference for patients suffering from diseases involving the liver, lungs, and blood. This is a timely investment that you can catch while it emerges from its bear market lows.
It could rival or surpass other recent Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock And 4 Runners Up
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Original: NVDA Feed: 3 Reasons Growth Investors Will Love Nvidia (NVDA)