U.S. Markets open in 1 hr 11 mins
  • S&P Futures

    3,441.75
    +19.00 (+0.56%)
     
  • Dow Futures

    28,261.00
    +161.00 (+0.57%)
     
  • Nasdaq Futures

    11,691.25
    +41.00 (+0.35%)
     
  • Russell 2000 Futures

    1,624.50
    +13.20 (+0.82%)
     
  • Crude Oil

    40.88
    +0.05 (+0.12%)
     
  • Gold

    1,905.30
    -6.40 (-0.33%)
     
  • Silver

    24.66
    -0.04 (-0.17%)
     
  • EUR/USD

    1.1815
    +0.0042 (+0.3544%)
     
  • 10-Yr Bond

    0.7610
    0.0000 (0.00%)
     
  • Vix

    28.57
    +1.16 (+4.23%)
     
  • GBP/USD

    1.2931
    -0.0010 (-0.0763%)
     
  • USD/JPY

    105.6600
    +0.2300 (+0.2182%)
     
  • BTC-USD

    11,803.93
    +746.92 (+6.76%)
     
  • CMC Crypto 200

    238.26
    +4.59 (+1.96%)
     
  • FTSE 100

    5,897.29
    +12.64 (+0.21%)
     
  • Nikkei 225

    23,567.04
    -104.09 (-0.44%)
     

3 Reasons Why Allegion (ALLE) Is a Great Growth Stock

Zacks Equity Research

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. But finding a growth stock that can live up to its true potential can be a tough task.

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 Allegion (ALLE) as one such stock. This company not only has a favorable Growth Score, but also 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 security device maker 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. 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 Allegion is 14.6%, investors should actually focus on the projected growth. The company's EPS is expected to grow 8.4% this year, crushing the industry average, which calls for EPS growth of 8.1%.

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, Allegion has an S/TA ratio of 1, which means that the company gets $1 in sales for each dollar in assets. Comparing this to the industry average of 0.83, it can be said that the company is more efficient.

In addition to efficiency in generating sales, sales growth plays an important role. And Allegion is well positioned from a sales growth perspective too. The company's sales are expected to grow 5.1% this year versus the industry average of 2.3%.

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 Allegion have been revising upward. The Zacks Consensus Estimate for the current year has surged 1.1% over the past month.

Bottom Line

Allegion 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 Allegion is a potential outperformer and a solid choice for growth investors.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Allegion PLC (ALLE) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research