Full access to Entrepreneur for $5
Subscribe

3 Reasons Why Growth Investors Shouldn't Overlook Century Communities (CCS)

Century Communities (CCS) is well positioned to outperform the market, as it exhibits above-average growth in financials.

By
This story originally appeared on Zacks

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. However, it isn't easy to find a great growth stock.

- Zacks

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, it's pretty easy to find cutting-edge growth stocks 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 Century Communities (CCS) 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 single-family homebuilder is a great growth pick right now, we have highlighted three of the most important factors below:

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 Century Communities is 29.1%, investors should actually focus on the projected growth. The company's EPS is expected to grow 119.5% this year, crushing the industry average, which calls for EPS growth of 72.4%.

Cash Flow Growth

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 Century Communities is 59.2%, which is higher than many of its peers. In fact, the rate compares to the industry average of 29.8%.

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 37.9% over the past 3-5 years versus the industry average of 23.7%.

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.

There have been upward revisions in current-year earnings estimates for Century Communities. The Zacks Consensus Estimate for the current year has surged 4.9% over the past month.

Bottom Line

Century Communities has not only earned a Growth Score of B based on a number of factors, including the ones discussed above, but it also carries a Zacks Rank #1 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 Century Communities 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

 

Century Communities, Inc. (CCS): Free Stock Analysis Report

 

To read this article on Zacks.com click here.

 

Zacks Investment Research