Yamaha Motor Co., Ltd. (YAMHF) is an Incredible Growth Stock: 3 Reasons Why
Yamaha Motor Co., Ltd. (YAMHF) could produce exceptional returns because of its solid growth attributes.
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. However, it isn't easy to find a great growth stock.
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.
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.
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 company is a great growth pick right now, we have highlighted three of the most important factors below:
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 Yamaha Motor Co., Ltd. is 12.9%, investors should actually focus on the projected growth. The company's EPS is expected to grow 113.8% this year, crushing the industry average, which calls for EPS growth of 95.4%.
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 0.59, 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 21.1% this year versus the industry average of 16.4%.
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 Yamaha Motor Co., Ltd. The Zacks Consensus Estimate for the current year has surged 0.2% 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.
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