3 Reasons Growth Investors Will Love Recruit Holdings Co., Ltd. (RCRRF)
Recruit Holdings Co., Ltd. (RCRRF) possesses solid growth attributes, which could help it handily outperform the market.
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 growth stock that can live up to its true potential can be a tough task.
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, 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.
Recruit Holdings Co., Ltd. (RCRRF) 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.
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.
Here are three of the most important factors that make the stock of this company a great growth pick right now.
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 Recruit Holdings Co., Ltd. is 15.7%, investors should actually focus on the projected growth. The company's EPS is expected to grow 100% this year, crushing the industry average, which calls for EPS growth of 12%.
Impressive Asset Utilization Ratio
Asset utilization ratio -- also known as sales-to-total-assets (S/TA) ratio -- is often overlooked by investors, but it is an important indicator in growth investing. This metric shows how efficiently a firm is utilizing its assets to generate sales.
Right now, Recruit Holdings Co., Ltd. has an S/TA ratio of 1.14, which means that the company gets $1.14 in sales for each dollar in assets. Comparing this to the industry average of 0.58, it can be said that the company is more efficient.
In addition to efficiency in generating sales, sales growth plays an important role. And Recruit Holdings Co., Ltd. is well positioned from a sales growth perspective too. The company's sales are expected to grow 15.7% this year versus the industry average of 8.9%.
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 Recruit Holdings Co., Ltd. have been revising upward. The Zacks Consensus Estimate for the current year has surged 3.3% over the past month.
Recruit Holdings Co., Ltd. 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 Recruit Holdings Co., Ltd. is a potential outperformer and a solid choice for growth investors.
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Recruit Holdings Co., Ltd. (RCRRF): Free Stock Analysis Report
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