3 Reasons Why Growth Investors Shouldn't Overlook Points International (PCOM)
Points International (PCOM) could produce exceptional returns because of its solid growth attributes.
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.
Our proprietary system currently recommends Points International (PCOM) 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).
Here are three of the most important factors that make the stock of this provider of technology for loyalty programs 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 Points International is 42.3%, investors should actually focus on the projected growth. The company's EPS is expected to grow 123.2% this year, crushing the industry average, which calls for EPS growth of 18.5%.
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 exhibits how efficiently a firm is utilizing its assets to generate sales.
Right now, Points International has an S/TA ratio of 2.21, which means that the company gets $2.21 in sales for each dollar in assets. Comparing this to the industry average of 0.72, it can be said that the company is more efficient.
In addition to efficiency in generating sales, sales growth plays an important role. And Points International looks attractive from a sales growth perspective as well. The company's sales are expected to grow 64.8% this year versus the industry average of 3.8%.
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 Points International. The Zacks Consensus Estimate for the current year has surged 272.7% over the past month.
Points International 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.
This combination indicates that Points International is a potential outperformer and a solid choice for growth investors.
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