Markets began 2025 on a strong footing but have since been gripped by heightened volatility. On April 2, President Donald Trump’s announcement of sweeping “Liberation Day” tariffs triggered global disruption, marking the onset of a new trade war. In the aftermath, uncertainty has clouded expectations around the tariffs’ potential impact on the U.S. economy and the Federal Reserve’s monetary policy decisions. Amid this backdrop, investors are approaching the markets with increased caution.
Therefore, the conventional method of selecting stocks is the need of the hour. One such way is choosing stocks with steady sales growth. In this regard, Meritage Homes Corporation (MTH – Free Report) , Zoom Communications Inc. (ZM – Free Report) , Edison International (EIX – Free Report) , Super Micro Computer Inc. (SMCI – Free Report) and Coherent Corp. (COHR – Free Report) are worth investing.
When evaluating a company, revenues often receive more scrutiny than earnings. Investors focus on a business’s ability to generate increasing sales over time, as this shows its potential to expand the customer base. In contrast, stagnant or declining sales growth may signal underlying challenges. While a company can still generate short-term profits, sustained growth is necessary to attract new investors.
Robust revenue growth is also essential for long-term profitability. While earnings can be improved by cutting costs, consistent bottom-line expansion typically requires steady sales increases.
Nonetheless, sales growth alone doesn’t provide a clear picture of a company’s financial health. Evaluating a company’s cash position alongside its revenues is a more effective investment strategy. A strong cash balance and steady cash flow provide flexibility for strategic decisions, operational stability and future investments.
Selecting the Potential Winning Stocks
To shortlist stocks with impressive sales growth and a high cash balance, we have selected 5-Year Historical Sales Growth (%) greater than X-Industry and Cash Flow of more than $500 million as our main screening parameters.
But, sales growth and cash strength are not the absolute criteria for selecting stocks. Hence, we have added other factors to arrive at a winning strategy.
P/S Ratio less than X-Industry: This metric determines the value placed on each dollar of a company’s revenues. The lower the ratio, the better it is for picking a stock since the investor is paying less for each unit of sales.
% Change F1 Sales Estimate Revisions (four weeks) greater than X-Industry: Estimate revisions, better than the industry, are often seen to trigger an increase in stock price.
Operating Margin (average last five years) greater than 5%: Operating margin measures how much every dollar of a company’s sales translates into profits. A high ratio indicates that the company has good cost control and sales are increasing faster than costs — an optimal situation.
Return on Equity (ROE) greater than 5%: This metric will ensure that sales growth is translated into profits and the company is not hoarding cash. A high ROE means that the company is spending wisely and is in all likelihood profitable.
Zacks Rank less than or equal to 2: Zacks Rank #1 (Strong Buy) or 2 (Buy) stocks are known to outperform, irrespective of the market environment. You can see the complete list of today’s Zacks #1 Rank stocks here.
5 Stocks With Robust Sales Growth
Scottsdale, AZ-based Meritage Homes is one of the leading designers and builders of single-family homes. MTH is primarily engaged in building and selling single-family homes for entry-level, first-time, move-up, luxury and active adult buyers in historically high-growth regions of the United States.
Meritage Homes’ expected sales growth rate for 2025 is 5%. The stock carries a Zacks Rank #2 at present.
Zoom, based in San Jose, CA, provides an artificial intelligence-first work platform for human connection. ZM serves individuals and education, entertainment/media, enterprise infrastructure, finance, government, healthcare, manufacturing, non-profit/not-for-profit and social impact, retail/consumer products and software/Internet industries.
Zoom’s expected sales growth rate for 2025 is 2.7%. The stock currently carries a Zacks Rank #2.
Rosemead, CA-based Edison is engaged in the generation and distribution of electric power. EIX is the parent holding company of Southern California Edison and Edison Energy.
Edison’s sales are expected to rise 2.2% in 2025. The stock carries a Zacks Rank #2 at present.
Super Micro, based in San Jose, CA, designs, develops, manufactures and sells energy-efficient, application-optimized server solutions based on the x86 architecture. SMCI’s solutions include a range of rack mount and blade server systems, as well as components.
Super Micro’s expected sales growth for 2025 is 59.2%. The company, at present, carries a Zacks Rank #2.
Saxonburg, PA-based Coherent develops, manufactures and markets engineered materials, optoelectronic components and devices, and optical and laser systems and subsystems. COHR operates through three segments: Networking, Materials and Lasers.
Coherent’s sales are expected to jump 21% in fiscal 2025. The stock carries a Zacks Rank #2 at present.
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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance
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