The U.S. Department of Commerce recently revised the GDP growth rate for the fourth quarter upward in its “third estimate” from 1% to 1.4%. Moreover, the U.S. economy expanded at an annual rate of 2.4% in 2015, in line with 2014’s growth rate. Despite weaknesses observed in some major components of the GDP including slump in corporate profits and decline in net exports, the economy managed to register moderate growth on the back of steadily increasing consumer spending. Given this backdrop, growth stocks may prove to be prudent investment opportunities for those who have a high risk appetite and are interested in getting the most from this favorable scenario.
U.S. Economy Back on Track
In addition to a 2.4% rise in the fourth quarter, consumer spending rose 3.1% last year, witnessing the highest rate of increase since 2005. The segment has contributed nearly 1.7% and 2.1% to GDP during the fourth quarter and last year, respectively. Improving labor market condition played an important role in boosting consumer spending over the last one-year period
Recently released data showed that the U.S. economy generated 242,000 jobs in February, significantly higher than January’s revised figure of 172,000. Meanwhile, the unemployment rate remained in line with January’s rate of 4.9%. Moreover, the GDP report showed that disposable personal income increased 2.3% in the fourth quarter and rose at a rate of 3.4% last year, its highest since 2006.
Additionally, significant recovery in the housing market played an important part in boosting the economy in recent times. Reportedly, residential investment jumped 10.1% in the fourth quarter, compared with a rise of 8.2% in the third. It also surged 8.9% in 2015, exceeding 2014’s gain of only 1.8%. Meanwhile, the National Association of Realtors reported that the pending home sales index increased 3.5% to a seven-month high of 109.1 in February. Last month’s increase also came in higher than the consensus estimate of a 1.7% rise.
Why Growth Stocks?
In this current situation, growth stocks can be considered as potential bets as these are believed to offer better returns as compared to major benchmarks. These stocks are expected to have the potential to record strong earnings growth going forward. Growth stocks, which are also called “glamor stocks,” are generally considered as well established as well as high quality stocks.
Though these stocks are often regarded as more volatile than other categories, they are also expected to fetch higher returns. Hence, investors with a sturdy tolerance to risk and preferring capital appreciation over dividend payouts may consider growth stocks to gain from the current scenario.
5 Growth Stocks to Buy
With the help of our new style score system, we have zeroed in on five stocks with market cap of over $1 billion that look promising based on their encouraging Zacks Rank and favorable Growth Style Score.
Our Growth Style Score condenses all the essential metrics from a company’s financial statements to get a true sense of the quality and sustainability of its growth. Our research shows that stocks with a Growth Style Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or #2 (Buy) offer the best investment opportunities in the growth investing space.
All the stocks selected here flaunt a solid Zacks Rank #1 (Strong Buy) and have a Growth Style Score of ‘A.’
Smith & Wesson Holding Corporation SWHC is one of the world's leading producers of quality handguns, law enforcement products and firearm safety and security products.
The company has a current year expected earnings per share (EPS) growth rate of 66.2%, significantly higher than the industry average of 18.1%. The earnings estimate for the current year has increased by 20.9% over the last 30 days.
Travelport Worldwide Limited TVPT is a Travel Commerce Platform providing distribution, technology, payment and other solutions for the global travel and tourism industry.
The company has a current year expected EPS growth rate of 27.6%, exceeding the industry average of 10.4%. The earnings estimate for the current year has increased by 1.04% over the last 30 days.
John Bean Technologies Corporation JBT is a leading global solutions provider to the food processing and air transportation industries.
The company has a current year expected EPS growth rate of 19.7%, outpacing the industry average of 15.3%. The earnings estimate for the current year has increased by 7.4% over the last 90 days.
Express Inc. EXPR is a specialty retailer of women's and men's apparel in the United States.
The company has a current year expected EPS growth rate of 16.6%, higher than the industry average of 11.7%. The earnings estimate for the current year has increased by 5.8% over the last 30 days.
PRA Health Sciences, Inc. PRAH operates as a global contract research organizations providing outsourced clinical development services to the biotechnology and pharmaceutical industries.
The company has a current year expected EPS growth rate of 18%. The earnings estimate for the current year has increased by 3.6% over the last 30 days.
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