3 Reasons Growth Investors Will Love Oxford Industries (OXM)
Oxford Industries (OXM) possesses solid growth attributes, which could help it handily outperform the market.
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. However, it isn't easy to find a great growth stock.
In addition to volatility, these stocks carry above-average risk by their very nature. Also, one could end up losing from a stock whose growth story is actually over or nearing its end.
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.
Oxford Industries (OXM) 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.
While there are numerous reasons why the stock of this owner of the Tommy Bahama, Lilly Pulitzer and Southern Tide clothing lines is a great growth pick right now, we have highlighted three of the most important factors below:
Arguably nothing is more important than earnings growth, as surging profit levels is what most investors are after. 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 Oxford Industries is 0.2%, investors should actually focus on the projected growth. The company's EPS is expected to grow 521.7% this year, crushing the industry average, which calls for EPS growth of 139.3%.
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 exhibits how efficiently a firm is utilizing its assets to generate sales.
Right now, Oxford Industries has an S/TA ratio of 1.17, which means that the company gets $1.17 in sales for each dollar in assets. Comparing this to the industry average of 1.02, 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 Oxford Industries is well positioned from a sales growth perspective too. The company's sales are expected to grow 51.4% this year versus the industry average of 15.1%.
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 Oxford Industries. The Zacks Consensus Estimate for the current year has surged 14.3% over the past month.
Oxford Industries 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 Oxford Industries is a potential outperformer and a solid choice for growth investors.
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