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3 Zacks Rank #1 Growth Stocks

James Giaquinto

This rough start to the fourth quarter may not have many investors thinking about growth stocks. But this could actually be the best time to find these movers, who may have pulled back during the melee.

The Zacks Rank #1 Growth Stocks screen can help you find stocks that still have room to run. 

In addition to using the Zacks Rank to find Strong Buys, this tool also looks for positions with a minimal 20% historical growth EPS rate and a 20% or more projected growth rate.

Here are three stocks that passed this screen:  


Guess? (GES)

Guess who’s really popular in Europe these days. That’s right… it’s Guess? (GES)!

(roll eyes here)

This casual apparel staple has reported topline growth for 12 straight quarters now, and most recently Europe was a big contributor with sales jumping 9.1% for the segment.

Overall, fiscal second-quarter revenue of $683.2 million beat the Zacks Consensus Estimate by about $10 million and improved 5.8% from last year.

Strong European results were attributed to store openings, improvement in wholesale revenue and comps growth.

The Americas wholesale segment also had a great performance with revenue jumping 22.3%.

The quarter included earnings of 38 cents, which improved 5.6% from last year and beat the Zacks Consensus Estimate by more than 31%.

GES has no plans of slowing down. Management thinks its robust global network, considerable brand strength and customer growth will keep the company performing well.

In fact, they’re so confident that they raised the fiscal 2020 earnings guidance to between $1.28 and $1.36, compared to the earlier outlook of $1.19 to $1.30.

The new guidance was actually above the Zacks Consensus Estimate at the time, so analysts had some work to do. Over the last two months, the guidance for the year ending January 2020 advanced 5.5% to $1.35.

In the same period of time, the Zacks Consensus Estimate for the year ending January 2021 rose 5.7% to $1.68, suggesting year-over-year improvement of more than 24%.  




RH (RH)

If you're wearing pricey clothes, driving a nice car and living in a big house; then you're not going to the Furiture Mart around the corner for your living room or bedroom set. Instead, you're going to RH (RH).

And with the consumer still going strong despite all the economic challenges, this luxury retailer has jumped more than 40% in 2019 with no slowdown in sight.

RH has outperformed the highly-ranked retail-home furnishings space by more than 10%. This area is in the top 19% of the Zacks Industry Rank with a gain of more than 31% this year.

The most recent report from last month marked the sixth straight positive surprise for the company. It reported fiscal second-quarter earnings of $3.20, which beat the Zacks Consensus Estimate of $2.70 by more than 18.5%. It also jumped by nearly 60% year over year.

The company beat the Zacks Consensus Estimate by double-digits in three of the last four quarters. Over that time, it has amassed an average surprise of 20.2%.

Adjusted revenue of $706.5 million jumped practically 10% from last year’s $642.7 million and topped our consensus by more than 1%.

Revenue growth was helped by the core RH business, solid performance of new galleries and the continued expansion of RH Hospitality.

Perhaps most importantly, the company took measure to combat the U.S.-China trade dispute and does not expect tariffs to impact its long-term goals.

Therefore, RH felt comfortable enough to raise its full-year guidance for earnings and revenue.

Analysts responded by raising their expectations over the past 30 days. In fact, there have been 10 upward revisions in that time and none going the other way.

As a result, the Zacks Consensus Estimate for this fiscal year (ending January 2020) is up 15% in the past month to $10.81 per share.

Likewise for next fiscal year (ending January 2021), estimates have increased 15.4% in 30 days to $12.39. Analysts also expect next year to grow approximately 14.6% from this year.  

In fact, RH raised its fiscal year 2019 EPS guidance again since the report after closing $350 million in offerings.   




Funko (FNKO)

The market was scratching its head a little when Funko (FNKO) went public back in 2017. Is there really that much demand for small, big-headed figures of characters like Ironman and Freddy Krueger?

Well, the answer is…yes!

And don’t forget Harry Potter school supplies, Pez dispensers, t-shirts and this year’s “Funkoween” offerings.  

This pop culture consumer products company hasn’t missed the Zacks Consensus Estimate since going IPO and is up approximately 50% so far in 2019.  

Most recently, FNKO reported a positive surprise of 92.3% in the second quarter! Earnings of 25 cents nearly doubled the Zacks Consensus Estimate of 13 cents and crushed last year’s 7 cents.  

Over the past four quarters, the stock has amassed an average surprise of more than 54%.

Revenue of $191.2 million soared past our expectation by nearly 12%, while also rising 38% from last year’s $138.72 million.

FNKO has long moved past the “fad” phase. It expects to continue putting up solid numbers… and the market agrees.

The company raised its full year sales outlook to between $840 million and $850 million with adjusted earnings per share of $1.15 to $1.22.

Analysts have responded appropriately over the past couple of months. The Zacks Consensus Estimate for this year is now $1.21, which means it has jumped 6.1% from 60 days ago.

Our estimate for 2020 is now $1.42, which is up 6.8% in two months and suggests a year-over-year improvement of 17.4%.   




More Stock News: This Is Bigger than the iPhone!                   

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