3 Reasons Why JB Hunt (JBHT) Is a Great Growth Stock
JB Hunt (JBHT) possesses solid growth attributes, which could help it handily outperform the market.
Growth investors focus on stocks that are seeing above-average financial growth, as this feature helps these securities garner the market's attention and deliver solid 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.
Our proprietary system currently recommends JB Hunt (JBHT) 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 returns are even better for stocks that possess the combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Here are three of the most important factors that make the stock of this trucking and logistics 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 JB Hunt is 9.5%, investors should actually focus on the projected growth. The company's EPS is expected to grow 18.2% this year, crushing the industry average, which calls for EPS growth of 15.4%.
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, JB Hunt has an S/TA ratio of 1.83, which means that the company gets $1.83 in sales for each dollar in assets. Comparing this to the industry average of 1.38, 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 JB Hunt looks attractive from a sales growth perspective as well. The company's sales are expected to grow 10.8% this year versus the industry average of 10.4%.
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 JB Hunt. The Zacks Consensus Estimate for the current year has surged 0.6% over the past month.
While the overall earnings estimate revisions have made JB Hunt a Zacks Rank #2 stock, it has earned itself a Growth Score of A based on a number of factors, including the ones discussed above.
This combination positions JB Hunt well for outperformance, so growth investors may want to bet on it.
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J.B. Hunt Transport Services, Inc. (JBHT): Free Stock Analysis Report
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