3 Reasons Why B2Gold (BTG) Is a Great Growth Stock
Growth stocks are attractive to many investors, as above-average financial growth helps these stocks easily 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.
By their very nature, these stocks carry above-average risk and volatility. Moreover, if a company's growth story is over or nearing its end, betting on it could lead to significant loss.
However, it's pretty easy to find cutting-edge growth stocks 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 B2Gold (BTG) 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 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 gold, silver and copper miner is a great growth pick right now, we have highlighted three of the most important factors below:
Earnings growth is arguably the most important factor, as stocks exhibiting exceptionally surging profit levels tend to attract the attention of most investors. 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 B2Gold is 60.1%, investors should actually focus on the projected growth. The company's EPS is expected to grow 254.3% this year, crushing the industry average, which calls for EPS growth of 37.4%.
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, B2Gold has an S/TA ratio of 0.47, which means that the company gets $0.47 in sales for each dollar in assets. Comparing this to the industry average of 0.26, it can be said that the company is more efficient.
In addition to efficiency in generating sales, sales growth plays an important role. And B2Gold is well positioned from a sales growth perspective too. The company's sales are expected to grow 37.1% this year versus the industry average of 13.1%.
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 B2Gold have been revising upward. The Zacks Consensus Estimate for the current year has surged 6.4% over the past month.
B2Gold has not only earned a Growth Score of A 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.
This combination positions B2Gold well for outperformance, so growth investors may want to bet on it.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.