U.S. markets open in 5 hours 34 minutes
  • S&P Futures

    4,263.00
    +8.25 (+0.19%)
     
  • Dow Futures

    34,424.00
    +43.00 (+0.13%)
     
  • Nasdaq Futures

    14,151.25
    +26.50 (+0.19%)
     
  • Russell 2000 Futures

    2,329.60
    +2.70 (+0.12%)
     
  • Crude Oil

    71.20
    +0.32 (+0.45%)
     
  • Gold

    1,868.70
    +2.80 (+0.15%)
     
  • Silver

    27.85
    -0.19 (-0.67%)
     
  • EUR/USD

    1.2149
    +0.0027 (+0.22%)
     
  • 10-Yr Bond

    1.5010
    0.0000 (0.00%)
     
  • Vix

    16.31
    +0.66 (+4.22%)
     
  • GBP/USD

    1.4119
    +0.0011 (+0.08%)
     
  • USD/JPY

    110.0210
    -0.0400 (-0.04%)
     
  • BTC-USD

    40,298.53
    +283.99 (+0.71%)
     
  • CMC Crypto 200

    1,012.20
    +43.36 (+4.48%)
     
  • FTSE 100

    7,179.78
    +33.10 (+0.46%)
     
  • Nikkei 225

    29,441.30
    +279.50 (+0.96%)
     

3 Reasons Why RPM International (RPM) Is a Great Growth Stock

  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
  • Oops!
    Something went wrong.
    Please try again later.

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.

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.

RPM International (RPM) 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 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 specialty chemicals company 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 RPM International is 6.1%, investors should actually focus on the projected growth. The company's EPS is expected to grow 38.6% this year, crushing the industry average, which calls for EPS growth of 10.1%.

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, RPM International has an S/TA ratio of 1.01, which means that the company gets $1.01 in sales for each dollar in assets. Comparing this to the industry average of 0.82, it can be said that the company is more efficient.

In addition to efficiency in generating sales, sales growth plays an important role. And RPM International looks attractive from a sales growth perspective as well. The company's sales are expected to grow 8.5% this year versus the industry average of 6.2%.

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 RPM International. The Zacks Consensus Estimate for the current year has surged 3.2% over the past month.

Bottom Line

While the overall earnings estimate revisions have made RPM International 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.

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

This combination indicates that RPM International 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
 
RPM International Inc. (RPM) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research