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 great growth stock is not easy at all.
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 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.
Delek US Holdings (DK) 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 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 refinery operator is a great growth pick right now, we have highlighted three of the most important factors below:
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 Delek US Holdings is 55.6%, investors should actually focus on the projected growth. The company's EPS is expected to grow 409.9% this year, crushing the industry average, which calls for EPS growth of 251.9%.
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, Delek US Holdings has an S/TA ratio of 2.17, which means that the company gets $2.17 in sales for each dollar in assets. Comparing this to the industry average of 2.16, it can be said that the company is more efficient.
In addition to efficiency in generating sales, sales growth plays an important role. And Delek US Holdings is well positioned from a sales growth perspective too. The company's sales are expected to grow 75.5% this year versus the industry average of 49%.
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 Delek US Holdings. The Zacks Consensus Estimate for the current year has surged 22.3% over the past month.
While the overall earnings estimate revisions have made Delek US Holdings 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 positions Delek US Holdings well for outperformance, so growth investors may want to bet on it.
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Delek US Holdings, Inc. (DK) : Free Stock Analysis Report
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