Given the not-so-convincing economic climate, it is obvious that you have to scan your portfolio to see whether it contains the right stocks. Short-listing of stocks to build an optimal portfolio is a Herculean task, as it may not be possible for you to look at each parameter and then gauge the stock on those. However, by using tools such as Zacks Rank and the new Style Score System, you can find stocks that have the potential to outperform the market. Today we have highlighted one such stock – Big Lots Inc. BIG.
Is Big Lots part of your portfolio? If not, then this is the right time to add the stock as it looks very promising. Moreover, the underlying factors are capable of carrying the momentum further. The stock carries a Zacks Rank #2 (Buy) and has a long-term earnings growth rate of 18.6%, which highlight its inherent strength. We believe that Big Lots offers a sound investment opportunity. The stock has gained roughly 11% over the past month whereas major indices such as the S&P 500 and Dow Jones Industrial Average have risen approximately 2.6% and 4.3%, respectively.
Earnings Front
The stock appears compelling from the earnings perspective, as it continued with its positive earnings surprise streak for the third straight quarter. In the last reported quarter, Big Lots outperformed the Zacks Consensus Estimate by 17.7% and raised its fiscal 2015 earnings guidance. Adjusted earnings per share are now projected to be in the band of $2.90–$3.00, compared with $2.80–$2.90 expected earlier.
Following the company’s upbeat performance in the second quarter of fiscal 2015, the Zacks Consensus Estimate has been portraying an uptrend, climbing 2.8% and 1.7% to $2.95 for fiscal 2015 and $3.51 for fiscal 2016, respectively, over the past 60 days. Clearly, a positive sentiment is palpable among analysts covering the stock.
Big Lots’ furniture financing program, merchandise initiatives and refurbishment of the food department are expected to help drive better-than-expected performance. Moreover, the company has been revamping its fleet of stores. Right from the ‘’Dock to Stock’’ initiative, rollout of the “automated labor scheduling system’’ and intensive training for its personnel, the company is leaving no stone unturned to enhance customers’ shopping experience.
Stock Score
The attractiveness of Big Lots as an investment option is also confirmed by its Growth Style Score of ‘A’. The Growth Style Score combines conventional growth metrics with a thorough analysis of the company’s income statement, balance sheet and statements of cash flows to evaluate its financial health and the sustainability of its growth trajectory. Back-tested results show that stocks with a Growth Style Score of ‘A’ or ‘B’, when combined with a Zacks Rank #1 (Strong Buy) or #2, offer the best upside potential.
Other Stocks with Winning Combination
Here are 3 retail stocks with a winning combination – Foot Locker, Inc. FL, sporting a Zacks Rank #1 and a Growth Style Score of ‘B’; American Eagle Outfitters, Inc. AEO and Best Buy Co., Inc. BBY, both holding a Zacks Rank #2 and a Growth Style Score of ‘A’.
Bottom Line
There’s plenty to be worried about in the current economic environment, and a thorough analysis is required before making any investment decision. Investors can confidently end their search at stocks with a better Zacks Rank status of either #1 or #2, which encompasses its strong fundamentals, promises price movement and highlights analysts’ constructive view on the same via positive estimate revisions. A sturdy portfolio always gives favorable returns.
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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 report
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