Here is Why Growth Investors Should Buy Yamaha Motor Co., Ltd. (YAMHF) Now
Yamaha Motor Co., Ltd. (YAMHF) possesses solid growth attributes, which could help it handily outperform the market.
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 growth stock that can live up to its true potential can be a tough task.
In addition to volatility, these stocks carry above-average risk by their very nature. Also, one could end up losing from a stock whose growth story is actually over or nearing its end.
However, 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, makes it pretty easy to find cutting-edge growth stocks.
Yamaha Motor Co., Ltd. (YAMHF) 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 for stocks that have a combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy), returns are even better.
Here are three of the most important factors that make the stock of this company a great growth pick right now.
Earnings growth is arguably the most important factor, as stocks exhibiting exceptionally surging profit levels tend to attract the attention of most investors. 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 Yamaha Motor Co., Ltd. is 12.9%, investors should actually focus on the projected growth. The company's EPS is expected to grow 113.4% this year, crushing the industry average, which calls for EPS growth of 91.5%.
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, Yamaha Motor Co., Ltd. has an S/TA ratio of 0.99, which means that the company gets $0.99 in sales for each dollar in assets. Comparing this to the industry average of 0.63, it can be said that the company is more efficient.
While the level of efficiency in generating sales matters a lot, so does the sales growth of a company. And Yamaha Motor Co., Ltd. looks attractive from a sales growth perspective as well. The company's sales are expected to grow 21% this year versus the industry average of 18.6%.
Promising Earnings Estimate Revisions
Superiority of a stock in terms of the metrics outlined above can be further validated by looking at the trend in earnings estimate revisions. A positive trend is of course favorable 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 Yamaha Motor Co., Ltd. have been revising upward. The Zacks Consensus Estimate for the current year has surged 16.5% over the past month.
While the overall earnings estimate revisions have made Yamaha Motor Co., Ltd. a Zacks Rank #1 stock, it has earned itself a Growth Score of A based on a number of factors, including the ones discussed above.
This combination positions Yamaha Motor Co., Ltd. well for outperformance, so growth investors may want to bet on it.
Infrastructure Stock Boom to Sweep America
A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.
The only question is “Will you get into the right stocks early when their growth potential is greatest?”
Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.Download FREE: How to Profit from Trillions on Spending for Infrastructure >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Yamaha Motor Co., Ltd. (YAMHF): Free Stock Analysis Report
To read this article on Zacks.com click here.