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.
In addition to volatility, these stocks carry above-average risk by their very nature. Also, one could end up losing from a stock whose growth story is actually over or nearing its end.
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.
Our proprietary system currently recommends Progress Software (PRGS) as one such stock. This company not only has a favorable Growth Score, but also carries a top Zacks Rank.
Research shows that stocks carrying the best growth features consistently beat the market. And returns are even better for stocks that possess the combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy).
While there are numerous reasons why the stock of this business software maker is a great growth pick right now, we have highlighted three of the most important factors below:
Earnings Growth
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 Progress Software is 20.5%, investors should actually focus on the projected growth. The company's EPS is expected to grow 6.3% this year, crushing the industry average, which calls for EPS growth of 1.9%.
Cash Flow Growth
Cash is the lifeblood of any business, but higher-than-average cash flow growth is more beneficial and important for growth-oriented companies than for mature companies. That's because, high cash accumulation enables these companies to undertake new projects without raising expensive outside funds.
Right now, year-over-year cash flow growth for Progress Software is 28.8%, which is higher than many of its peers. In fact, the rate compares to the industry average of 7.4%.
While investors should actually consider the current cash flow growth, it's worth taking a look at the historical rate too for putting the current reading into proper perspective. The company's annualized cash flow growth rate has been 20.5% over the past 3-5 years versus the industry average of 8.7%.
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 Progress Software. The Zacks Consensus Estimate for the current year has surged 2.5% over the past month.
Bottom Line
While the overall earnings estimate revisions have made Progress Software a Zacks Rank #2 stock, it has earned itself a Growth Score of B 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 indicates that Progress Software is a potential outperformer and a solid choice for growth investors.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free reportProgress Software Corporation (PRGS) : Free Stock Analysis ReportTo read this article on Zacks.com click here.
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Progress Software (PRGS) is an Incredible Growth Stock: 3 Reasons Why - Yahoo Finance
- Progress Lighting - Home - December 22nd, 2016 [December 22nd, 2016]
- Home - Progress Lighting Outlet - Authorized Progress Dealer - January 13th, 2017 [January 13th, 2017]
- What does progress mean? - Definitions.net - January 13th, 2017 [January 13th, 2017]
- Progress Fire Company Harrisburg, PA - January 13th, 2017 [January 13th, 2017]
- Homepage Center for American Progress - January 13th, 2017 [January 13th, 2017]
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- IMF: Greece's debts are still unsustainable despite progress - The Seattle Times - February 7th, 2017 [February 7th, 2017]
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- Progress apparent on defense - Pittsburgh Steelers - Steelers.com - February 7th, 2017 [February 7th, 2017]
- IMF: Greece's Debts are Still Unsustainable, Despite Progress - Voice of America - February 7th, 2017 [February 7th, 2017]
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- Cries of 'dictator' show Pope Francis is making progress - Crux: Covering all things Catholic - February 8th, 2017 [February 8th, 2017]
- Officials: City is making progress in effort to address opioid crisis - The Union Leader - February 8th, 2017 [February 8th, 2017]
- IN OUR VIEW: Work Ready in Progress for Carter - The Independent - February 8th, 2017 [February 8th, 2017]
- BP's Earnings Keep Showing Progress, Even if the Headline Results Don't Say So - Motley Fool - February 8th, 2017 [February 8th, 2017]
- Women's Progress in the Boardroom Took a Hit in 2016 - Inc.com - February 9th, 2017 [February 9th, 2017]
- Blight Elimination Progress, Uplifting - MyWabashValley - February 9th, 2017 [February 9th, 2017]
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- David Johnson showed off the insane progress he's making in rehab from his knee injury - USA TODAY - February 9th, 2017 [February 9th, 2017]
- Through the looking glass: Tower view showcases progress on Amazon's unique biospheres - GeekWire - February 9th, 2017 [February 9th, 2017]
- Britney Spears Says Niece Maddie Is 'Making Progress' After ATV Accident: 'Let's All Keep Praying' - PEOPLE.com - February 9th, 2017 [February 9th, 2017]
- Progress on vet's Mustang to be unveiled - Indianapolis Star - February 9th, 2017 [February 9th, 2017]
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- Forecasters See Slow Progress in Labor-Market Measures Favored by Trump Administration - Wall Street Journal - February 9th, 2017 [February 9th, 2017]
- 'Paper boys' were the lifeblood of The Daily Progress - The Daily Progress - February 10th, 2017 [February 10th, 2017]
- Cliffs Natural Resources Is Showing a Lot of Progress on Its Return to Profitability - Motley Fool - February 10th, 2017 [February 10th, 2017]
- ATA says states' telemedicine progress a mixed bag ... - FierceHealthcare - February 10th, 2017 [February 10th, 2017]
- Seltzer's Notebook | Colangelo Encouraged by Sixers' Progress - Sixers.com - February 10th, 2017 [February 10th, 2017]
- The Trump administration can't entirely roll back progress on climate change here's why - Washington Post - February 10th, 2017 [February 10th, 2017]
- Colts position review: OL showed legit progress, but work remains - Indianapolis Star - February 10th, 2017 [February 10th, 2017]
- Egyptian Economy Making Slow, Tentative Progress - Voice of America - February 10th, 2017 [February 10th, 2017]
- ATA: States show mixed progress with telemedicine | Healthcare Dive - Healthcare Dive - February 11th, 2017 [February 11th, 2017]
- Louisville City notes: McCabe making progress - The Courier-Journal - February 11th, 2017 [February 11th, 2017]
- Jeremy Lin: Progress but no timetable - NetsDaily - February 11th, 2017 [February 11th, 2017]
- Marginal progress for Turkish-backed forces in north Syria - LA Daily News - February 11th, 2017 [February 11th, 2017]
- Jimmy Cheek: UT chancellor appreciative of hard work, progress on journey - Knoxville News Sentinel - February 12th, 2017 [February 12th, 2017]
- Syria Regional Crisis 2016 Emergency Appeal - Progress Report - Reliefweb - February 12th, 2017 [February 12th, 2017]
- CWLP officials: Bailout repayment would set back progress - The State Journal-Register - February 12th, 2017 [February 12th, 2017]
- Pistons' Johnson making halting but definite progress - The Detroit News - February 12th, 2017 [February 12th, 2017]
- Clairton works: Real progress is coming to the former steel town - Pittsburgh Post-Gazette - February 12th, 2017 [February 12th, 2017]
- The Democrats' Strategy: Hindering Progress For Partisan Politics - Daily Caller - February 13th, 2017 [February 13th, 2017]
- The surprising progress stoppers on the Dallas Cowboys defensive line - Cowboys Wire - February 13th, 2017 [February 13th, 2017]
- Gender Progress in Ballet - Huffington Post - February 13th, 2017 [February 13th, 2017]
- Foyt pleased with progress, regrets lack of time - Motorsport.com, Edition: Global - February 13th, 2017 [February 13th, 2017]
- Progress Made, but Threat Lingers at California's Oroville Dam - Wall Street Journal - February 13th, 2017 [February 13th, 2017]
- Adele, Beyonc, and the Grammys' Fear of Progress - The Atlantic - February 13th, 2017 [February 13th, 2017]
- North Korea Claims Progress on Long-Range Goal With Missile Test - New York Times - February 13th, 2017 [February 13th, 2017]
- How Travel Bans Can Impede America's Progress - Forbes - Forbes - February 13th, 2017 [February 13th, 2017]
- Jeff Sessions' appointment threatens decades of civil rights progress - The Hill (blog) - February 14th, 2017 [February 14th, 2017]
- Ionis Earns $75M Milestone from Bayer for Progress of Antisense Drug Program - Genetic Engineering & Biotechnology News (press release) - February 14th, 2017 [February 14th, 2017]
- Guilford Schools annual report shows mixed results on progress - Greensboro News & Record (blog) - February 14th, 2017 [February 14th, 2017]
- Sniper Elite 4 review in progress - PC Gamer - February 14th, 2017 [February 14th, 2017]
- For Honor Review In Progress - GameSpot - February 14th, 2017 [February 14th, 2017]
- China's military progress challenges Western dominance, says IISS - Deutsche Welle - February 15th, 2017 [February 15th, 2017]
- PFW in Progress Recap 2/14: Patriots Offseason Outlook | New ... - Patriots.com - February 15th, 2017 [February 15th, 2017]
- Daily Progress, chamber establish regional business Hall of Fame - The Daily Progress - February 15th, 2017 [February 15th, 2017]
- Huntsville-based Progress Bank to acquire Birmingham's First Partners Bank - Birmingham Business Journal - February 15th, 2017 [February 15th, 2017]
- City, UF sign partnership for progress - Gainesville Sun - February 15th, 2017 [February 15th, 2017]
- California officials lift evacuation order for 200000 threatened by damaged dam - CBS News - February 15th, 2017 [February 15th, 2017]
- 5G progress at Ericsson could help enterprises work worldwide - Computerworld - February 16th, 2017 [February 16th, 2017]
- Officials making 'great progress' on California dam repairs, remind residents to stay vigilant - Fox News - February 16th, 2017 [February 16th, 2017]
- Halo Wars 2 Review in Progress - IGN - February 16th, 2017 [February 16th, 2017]
- CUGNON: Forward progress - Yale Daily News (blog) - February 16th, 2017 [February 16th, 2017]
- F-35 Program Makes Significant, Solid Progress, Official Says - Department of Defense - February 16th, 2017 [February 16th, 2017]
- Lenovo's data center ambitions remain work in progress following Q3 results - ZDNet - February 16th, 2017 [February 16th, 2017]
- PFW in Progress Recap 2/16: Free Agency and Potential Patriots - Patriots.com - February 16th, 2017 [February 16th, 2017]
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- Combine invites are another sign of progress at Michigan - Big Ten ... - ESPN (blog) - February 16th, 2017 [February 16th, 2017]
- Halo Wars 2 review in progress - PC Gamer - February 17th, 2017 [February 17th, 2017]
- 'Hero' film produced just for Charlottesville featured the mayor, The Daily Progress - The Daily Progress - February 17th, 2017 [February 17th, 2017]
- Republicans' health care overhaul still a work in progress - Press Herald - February 17th, 2017 [February 17th, 2017]
- Trump Boasts Of 'Incredible Progress' In 4 Weeks Of Presidency - NPR - February 17th, 2017 [February 17th, 2017]
- Donald Trump touts promise progress at press conference - PolitiFact - February 17th, 2017 [February 17th, 2017]
- Mild winter helping crews make significant progress on East End Connector - WRAL.com - February 18th, 2017 [February 18th, 2017]
- Committee updates Legislature on precinct consolidation progress - Chicago Tribune - February 18th, 2017 [February 18th, 2017]