3 Reasons Why Apple is a Solid Choice
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.
That's because, these stocks usually carry above-average risk and volatility. In fact, betting on a stock for which the growth story is actually over or nearing its end could lead to significant loss.
Apple (AAPL) is one such stock that me currently recommends. Studies have shown that stocks with the best growth features consistently outperform the market.
While there are numerous reasons why the stock of this maker of iPhones, iPads and other products 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. And for growth investors, double-digit earnings growth is definitely preferable, and often an indication of strong prospects (and stock price gains) for the company under consideration.
While the historical EPS growth rate for Apple is 20.5%, investors should actually focus on the projected growth. The company's EPS is expected to grow 9.8% this year, crushing the industry average, which calls for EPS growth of 0.6%.
Cash Flow Growth
While cash is the lifeblood of any business, higher-than-average cash flow growth is more important and beneficial for growth-oriented companies than for mature companies. That's because, growth in cash flow enables these companies to expand their businesses without depending on expensive outside funds.
Right now, year-over-year cash flow growth for Apple is 54.8%, which is higher than many of its peers. In fact, the rate compares to the industry average of 35.6%.
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 13.5% over the past 3-5 years versus the industry average of 12.6%.
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.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
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