U.S. Markets open in 7 hrs 21 mins

3 Reasons Why Growth Investors Shouldn't Overlook Carlisle (CSL)

Zacks Equity Research
Adobe Systems (ADBE) closed at $274.28 in the latest trading session, marking a -0.73% move from the prior day.

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. But finding a great growth stock is not easy at all.

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.

Our proprietary system currently recommends Carlisle (CSL) 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).

While there are numerous reasons why the stock of this diversified manufacturer 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. 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 Carlisle is 10.8%, investors should actually focus on the projected growth. The company's EPS is expected to grow 23% this year, crushing the industry average, which calls for EPS growth of 2.8%.

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, Carlisle has an S/TA ratio of 0.85, which means that the company gets $0.85 in sales for each dollar in assets. Comparing this to the industry average of 0.8, it can be said that the company is more efficient.

In addition to efficiency in generating sales, sales growth plays an important role. And Carlisle looks attractive from a sales growth perspective as well. The company's sales are expected to grow 8.6% this year versus the industry average of 0%.

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.

The current-year earnings estimates for Carlisle have been revising upward. The Zacks Consensus Estimate for the current year has surged 2.3% over the past month.

Bottom Line

While the overall earnings estimate revisions have made Carlisle a Zacks Rank #2 stock, it has earned itself a Growth Score of B based on a number of factors, including the ones discussed above.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

This combination indicates that Carlisle 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
 
Carlisle Companies Incorporated (CSL) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.