Investors seek growth stocks to capitalize on above-average growth in financials that help these securities grab the market’s attention and produce exceptional returns. But finding a great growth stock is not easy at all.
By their very nature, these stocks carry above-average risk and volatility. Moreover, if a company’s growth story is over or nearing its end, betting on it could lead to significant loss.
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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.
Our proprietary system currently recommends Dundee Precious Metals Inc. (DPMLF) as one such stock. This 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).
While there are numerous reasons why the stock of this company is a great growth pick right now, we have highlighted three of the most important factors below:
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 Dundee Precious Metals is 5.5%, investors should actually focus on the projected growth. The company’s EPS is expected to grow 64.1% this year, crushing the industry average, which calls for EPS growth of 40.3%.
While cash is the lifeblood of any business, higher-than-average cash flow growth is more important and beneficial for growth-oriented companies than for mature companies. That’s because, growth in cash flow enables these companies to expand their businesses without depending on expensive outside funds.
Right now, year-over-year cash flow growth for Dundee Precious Metals is 21.6%, which is higher than many of its peers. In fact, the rate compares to the industry average of 6%.
While investors should actually consider the current cash flow growth, it’s worth taking a look at the historical rate too for putting the current reading into proper perspective. The company’s annualized cash flow growth rate has been 22.8% over the past 3-5 years versus the industry average of 14%.
