Markets started 2025 on a strong note, but volatility has since taken hold. Earlier this week, the introduction of new tariffs on Canada, China and Mexico triggered a sharp selloff, and all three major indexes tanked, erasing the S&P 500’s post-Election Day gains. Although markets rebounded yesterday, concerns over the economic impact of these tariffs—along with potential retaliatory measures—are likely to keep investor sentiment cautious.
Against such a backdrop, the conventional method of selecting stocks is the need of the hour. One such way is choosing stocks with steady sales growth. In this regard, Darden Restaurants DRI, The Middleby Corporation MIDD, Intuit Inc. INTU, Cullen/Frost Bankers CFR and American Electric Power AEP are worth betting on.
When evaluating a company, revenue often receives more scrutiny than earnings. Investors focus on a business’s ability to generate increasing sales over time, as this indicates its potential to expand its customer base. In contrast, stagnant or declining sales growth may signal underlying challenges. While a company can still generate short-term profits, sustained growth is necessary to attract new investors.
Strong revenue growth is also essential for long-term profitability. Although earnings can be improved by cutting costs, consistent bottom-line expansion typically requires steady sales increases.
However, sales growth alone doesn’t provide a complete picture of a company’s financial health. Evaluating a company’s cash position alongside its revenues is a more effective investment strategy. A strong cash balance and steady cash flow provide flexibility for strategic decisions, operational stability and future investments.
Selecting the Potential Winning Stocks
To shortlist stocks with impressive sales growth and a high cash balance, we have selected 5-Year Historical Sales Growth (%) greater than X-Industry and Cash Flow of more than $500 million as our main screening parameters.
But sales growth and cash strength are not the absolute criteria for selecting stocks. Hence, we have added other factors to arrive at a winning strategy.
P/S Ratio less than X-Industry: This metric determines the value placed on each dollar of a company’s revenues. The lower the ratio, the better it is for picking a stock since the investor is paying less for each unit of sales.
% Change F1 Sales Estimate Revisions (four weeks) greater than X-Industry: Estimate revisions, better than the industry, are often seen to trigger an increase in stock price.
Operating Margin (average last five years) greater than 5%: Operating margin measures how much every dollar of a company's sales translates into profits. A high ratio indicates that the company has good cost control and sales are increasing faster than costs — an optimal situation.
Return on Equity (ROE) greater than 5%: This metric will ensure that sales growth is translated into profits and the company is not hoarding cash. A high ROE means that the company is spending wisely and is in all likelihood profitable.
Zacks Rank less than or equal to 2: Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks are known to outperform, irrespective of the market environment. You can see the complete list of today’s Zacks #1 Rank stocks here.
5 Stocks With Strong Sales Growth
Orlando, FL-based Darden is one of the largest casual dining restaurant operators worldwide. DRI, operating via its subsidiaries, oversees restaurants throughout the United States and Canada, excluding two joint venture restaurants, four managed locations operating under contractual agreements and 91 franchised restaurants.
Darden’s expected sales growth rate for fiscal 2025 is 6.3%. The stock carries a Zacks Rank #2 at present.
Middleby, based in Elgin, IL, provides cooking, warming, food preparation and packaging equipment to commercial, industrial processing and residential markets. MIDD has manufacturing and distribution operations in the United States, Canada, Asia, Europe, the Middle East and Latin America.
Middleby’s expected sales growth rate for 2025 is 3.4%. The stock currently carries a Zacks Rank #2.
Mountain View, CA-based Intuit is a business and financial software company that develops and sells financial, accounting and tax preparation software and related services globally. INTU has offices in the United States, Canada, India, the United Kingdom, Singapore, Australia and other locations.
Intuit’s sales are expected to rise 12.4% in 2025. The stock carries a Zacks Rank #2 at present.
Cullen/Frost, based in San Antonio, TX, is a financial holding company and a bank holding company. CFR provides a broad array of products and services throughout numerous Texas markets.
Cullen/Frost’s expected sales growth for 2025 is 4.1%. The company, at present, sports a Zacks Rank #1.
Columbus, OH-based American Electric Power is a public utility holding company that generates, transmits and distributes electricity, natural gas and other commodities. Approximately 37% of AEP’s power is generated from coal and lignite, 22% from nuclear energy, 22% from natural gas and oil and the remaining 19% from renewable sources.
American Electric Power’s sales are expected to increase 5% in 2025. The stock carries a Zacks Rank #2 at present.
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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance
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See Stocks Now >>American Electric Power Company, Inc. (AEP) : Free Stock Analysis Report
Darden Restaurants, Inc. (DRI) : Free Stock Analysis Report
Intuit Inc. (INTU) : Free Stock Analysis Report
Cullen/Frost Bankers, Inc. (CFR) : Free Stock Analysis Report
The Middleby Corporation (MIDD) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
