Yahoo Finance Is Euronet Worldwide (EEFT) a Solid Growth Stock? 3 Reasons to Think "Yes"
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 growth stock that can live up to its true potential can be a tough task.
By their very nature, these stocks carry above-average risk and volatility. Moreover, if a company's growth story is over or nearing its end, betting on it could lead to significant loss.
However, it's pretty easy to find cutting-edge growth stocks 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 Euronet Worldwide (EEFT) as one such stock. This company not only has a favorable Growth Score, but also carries a top Zacks Rank.
Studies have shown that stocks with the best growth features consistently outperform the market. And for stocks that have a combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy), returns are even better.
While there are numerous reasons why the stock of this electronic payments and transactions processor is a great growth pick right now, we have highlighted three of the most important factors below:
Earnings Growth
Earnings growth is arguably the most important factor, as stocks exhibiting exceptionally surging profit levels tend to attract the attention of most investors. 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 Euronet Worldwide is 2.4%, investors should actually focus on the projected growth. The company's EPS is expected to grow 13.5% this year, crushing the industry average, which calls for EPS growth of 12.3%.
Impressive Asset Utilization Ratio
Asset utilization ratio -- also known as sales-to-total-assets (S/TA) ratio -- is often overlooked by investors, but it is an important indicator in growth investing. This metric exhibits how efficiently a firm is utilizing its assets to generate sales.
Right now, Euronet Worldwide has an S/TA ratio of 0.69, which means that the company gets $0.69 in sales for each dollar in assets. Comparing this to the industry average of 0.21, it can be said that the company is more efficient.
In addition to efficiency in generating sales, sales growth plays an important role. And Euronet Worldwide looks attractive from a sales growth perspective as well. The company's sales are expected to grow 7.1% this year versus the industry average of 2.6%.
Promising Earnings Estimate Revisions
Superiority of a stock in terms of the metrics outlined above can be further validated by looking at the trend in earnings estimate revisions. A positive trend is of course favorable here. Empirical research shows that there is a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
The current-year earnings estimates for Euronet Worldwide have been revising upward. The Zacks Consensus Estimate for the current year has surged 0.3% over the past month.
Bottom Line
While the overall earnings estimate revisions have made Euronet Worldwide a Zacks Rank #2 stock, it has earned itself a Growth Score of A 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 Euronet Worldwide is a potential outperformer and a solid choice for growth investors.
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Euronet Worldwide, Inc. (EEFT) : Free Stock Analysis Report
