3 Reasons Growth Investors Will Love Columbia Sportswear (COLM)

Growth stocks are attractive to many investors because above-average financial growth makes it easy for these stocks to grab the attention of the market and produce exceptional returns. But finding growth stock that can live up to its true potential can be a difficult task.

By their very nature, these stocks carry above-average risk and volatility. Additionally, if a business’s growth story is over or coming to an end, betting on it could result in a significant loss.

However, it is quite easy to find top growth stocks using the Zacks Growth Style Score (which is part of the Zacks Style Scores system), which goes beyond traditional growth attributes to analyze growth prospects. realities of a business.

Columbia Sportswear (COLM) is one of those stocks that our Exclusive System currently recommends. The company not only has a favorable growth score, but also holds a higher Zacks ranking.

Studies have shown that stocks with the best growth characteristics consistently outperform the market. And returns are even better for stocks that have the combination of a Growth Score of A or B and a Zacks # 1 (strong buy) or 2 (buy) rating.

While there are plenty of reasons why this outdoor equipment manufacturer’s stock is a great growing choice right now, we’ve highlighted three of the most important factors below:

Profit growth

Arguably, nothing is more important than earnings growth, as most investors look for rising earnings levels. And for growth investors, double-digit earnings growth is definitely preferable, and often an indication of a strong outlook (and stock price gains) for the company under consideration.

While the historic EPS growth rate for Columbia Sportswear is 0.4%, investors should actually be focusing on projected growth. The company’s EPS is expected to grow 185% this year, beating the industry average, which calls for EPS growth of 153%.

Impressive asset utilization ratio

Growth investors often overlook the asset utilization ratio, also known as the sales to total assets (S / TA) ratio, but this is an important characteristic of a real growth value. This metric shows how efficiently a business uses its assets to generate sales.

Right now, Columbia Sportswear has an S / TA ratio of 1.01, which means the company gets $ 1.01 in sales for every dollar in assets. Comparing that to the industry average of 0.98, it can be said that the company is more efficient.

In addition to efficiency in generating sales, sales growth plays an important role. And Columbia Sportswear also looks attractive from a sales growth standpoint. The company’s sales are expected to increase 26.9% this year, compared to an industry average of 13%.

Revisions to promising earnings estimates

The superiority of a stock in terms of the parameters described above can be further validated by examining the trend of revisions to earnings estimates. A positive trend is of course favorable here. Empirical research shows that there is a strong correlation between trends in earnings estimate revisions and short-term stock price movements.

There have been upward revisions to current year earnings estimates for Columbia Sportswear. Zacks’ consensus estimate for the current year jumped 6.2% over the past month.

Final result

While the overall earnings estimate revisions made Columbia Sportswear a # 1 Zacks stock, it earned a growth score of B based on a number of factors, including those discussed below. above.

You can see the full list of Zacks # 1 Rank (Fort Buy) stocks today here.

This combination positions Columbia Sportswear well for outperformance, so growth investors may want to bet on it.

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About Lonnie G. Mitchell

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