Investors seek growth stocks to capitalize on above-average growth in financials that help these securities grab the market’s attention and produce exceptional returns. However, it isn’t easy to find a great growth stock. <\/p>\n
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. <\/p>\n
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. <\/p>\n
Our proprietary system currently recommends Texas Roadhouse (TXRH) as one such stock. This company not only has a favorable Growth Score, but also carries a top Zacks Rank. <\/p>\n
Studies have shown that stocks with the best growth features consistently outperform 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). <\/p>\n
Here are three of the most important factors that make the stock of this restaurant chain a great growth pick right now. <\/p>\n
Earnings Growth <\/p>\n
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. <\/p>\n
While the historical EPS growth rate for Texas Roadhouse is 17.8%, investors should actually focus on the projected growth. The company’s EPS is expected to grow 8.8% this year, crushing the industry average, which calls for EPS growth of 7.6%. <\/p>\n
Impressive Asset Utilization Ratio <\/p>\n
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. <\/p>\n
Right now, Texas Roadhouse has an S\/TA ratio of 1.77, which means that the company gets $1.77 in sales for each dollar in assets. Comparing this to the industry average of 1.06, it can be said that the company is more efficient. <\/p>\n
In addition to efficiency in generating sales, sales growth plays an important role. And Texas Roadhouse is well positioned from a sales growth perspective too. The company’s sales are expected to grow 11.2% this year versus the industry average of 1.9%. <\/p>\n
Promising Earnings Estimate Revisions <\/p>\n
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. <\/p>\n
The current-year earnings estimates for Texas Roadhouse have been revising upward. The Zacks Consensus Estimate for the current year has surged 0.3% over the past month. <\/p>\n
Bottom Line <\/p>\n
While the overall earnings estimate revisions have made Texas Roadhouse 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. <\/p>\n
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. <\/p>\n
This combination indicates that Texas Roadhouse is a potential outperformer and a solid choice for growth investors. <\/p>\n
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<\/a> <\/p>\n Texas Roadhouse, Inc. (TXRH) : Free Stock Analysis Report<\/a> <\/p>\n This article originally published on Zacks Investment Research (zacks.com).<\/a> <\/p>\n