Is Omnicell (OMCL) a Solid Growth Stock? 3 Reasons to Think " Yes "
Omnicell (OMCL) is well positioned to outperform the market, as it exhibits above-average growth in financials.
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.
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.
Omnicell (OMCL) is on the list of such stocks currently recommended by our proprietary system. In addition to a favorable Growth Score, it 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 Omnicell Inc. 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. And for growth investors, double-digit earnings growth is definitely preferable, and often an indication of strong prospects (and stock price gains) for the company under consideration.
While the historical EPS growth rate for Omnicell is 60.5%, investors should actually focus on the projected growth. The company's EPS is expected to grow 46% this year, crushing the industry average, which calls for EPS growth of 5.8%.
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, Omnicell has an S/TA ratio of 0.53, which means that the company gets $0.53 in sales for each dollar in assets. Comparing this to the industry average of 0.43, it can be said that the company is more efficient.
In addition to efficiency in generating sales, sales growth plays an important role. And Omnicell looks attractive from a sales growth perspective as well. The company's sales are expected to grow 24.6% this year versus the industry average of 17.9%.
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.
There have been upward revisions in current-year earnings estimates for Omnicell. The Zacks Consensus Estimate for the current year has surged 0.8% over the past month.
Omnicell 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.
This combination indicates that Omnicell is a potential outperformer and a solid choice for growth investors.
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