3 Reasons Why Growth Investors Shouldn't Overlook MasterCraft Boat Holdings, Inc. (MCFT)
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.
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, 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, makes it pretty easy to find cutting-edge growth stocks.
MasterCraft Boat Holdings, Inc. (MCFT) is one such stock that our proprietary system currently recommends. The 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.
Here are three of the most important factors that make the stock of this sport boats maker a great growth pick right now.
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 MasterCraft Boat Holdings, Inc. is 19.4%, investors should actually focus on the projected growth. The company's EPS is expected to grow 97.8% this year, crushing the industry average, which calls for EPS growth of 35.8%.
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 exhibits how efficiently a firm is utilizing its assets to generate sales.
Right now, MasterCraft Boat Holdings, Inc. has an S/TA ratio of 1.68, which means that the company gets $1.68 in sales for each dollar in assets. Comparing this to the industry average of 1.43, it can be said that the company is more efficient.
In addition to efficiency in generating sales, sales growth plays an important role. And MasterCraft Boat Holdings, Inc. looks attractive from a sales growth perspective as well. The company's sales are expected to grow 38.1% this year versus the industry average of 18.6%.
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.
There have been upward revisions in current-year earnings estimates for MasterCraft Boat Holdings, Inc. The Zacks Consensus Estimate for the current year has surged 6.9% over the past month.
MasterCraft Boat Holdings, Inc. 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 #1 because of the positive earnings estimate revisions.
This combination indicates that MasterCraft Boat Holdings, Inc. is a potential outperformer and a solid choice for growth investors.
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