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Byline Bancorp (BY) is an Incredible Growth Stock: 3 Reasons Why

Byline Bancorp (BY) is well positioned to outperform the market, as it exhibits above-average growth in financials.

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This story originally appeared on Zacks

Growth stocks are attractive to many investors, as above-average financial growth helps these stocks easily grab the market's attention and produce exceptional returns. But finding a great growth stock is not easy at all.

- Zacks

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 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.

Our proprietary system currently recommends Byline Bancorp (BY) as one such stock. This company not only has a favorable Growth Score, but also carries a top Zacks Rank.

Studies have shown that stocks with the best growth features consistently outperform 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.

While there are numerous reasons why the stock of this bank holding company 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 Byline Bancorp is 14.3%, investors should actually focus on the projected growth. The company's EPS is expected to grow 129.8% this year, crushing the industry average, which calls for EPS growth of 41.6%.

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, Byline Bancorp has an S/TA ratio of 0.05, which means that the company gets $0.05 in sales for each dollar in assets. Comparing this to the industry average of 0.04, 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 Byline Bancorp looks attractive from a sales growth perspective as well. The company's sales are expected to grow 8.9% this year versus the industry average of 0%.

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 Byline Bancorp have been revising upward. The Zacks Consensus Estimate for the current year has surged 10.7% over the past month.

Bottom Line

Byline Bancorp 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 #2 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 indicates that Byline Bancorp is a potential outperformer and a solid choice for growth investors.



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