3 Reasons Growth Investors Should Consider Globus Medical (GMED)

Growth investors typically look for stocks that show above-average growth in their financial performance. This is often a sign that a company can generate strong returns in the long run. However, identifying a growth stock that can truly achieve this potential can be quite challenging.

Growth stocks, by their nature, tend to be more volatile and come with higher risks. Investors may find themselves losing money on stocks whose growth trajectories have plateaued or are on the decline.

Fortunately, tools like the Zacks Growth Style Score can simplify the process of finding promising growth stocks. This score evaluates a company's growth potential based not only on traditional metrics but also on a more comprehensive analysis of its prospects.

One company that stands out in this regard is Globus Medical (GMED). Our analysis shows that it not only has a favorable Growth Score but also ranks highly according to the Zacks ranking system.

Historical data indicates that stocks with strong growth characteristics tend to outperform the market consistently. The best returns are often seen in those stocks with either an A or B Growth Score, paired with a Zacks Rank of #1 (Strong Buy) or #2 (Buy).

Earnings Growth

Earnings growth is perhaps the most crucial factor for investors who prioritize growth. Higher profits are what truly interest investors. For growth stock buyers, double-digit earnings growth is especially appealing as it often suggests robust future prospects and potential stock price appreciation.

In the case of Globus Medical, the historical earnings per share (EPS) growth rate stands at 14.2%. However, the more significant indicator is the expected growth in EPS, which is projected to hit 28.4% this year, surpassing the industry average of 16.5%.

Cash Flow Growth

Cash flow is essential for any business, and for growth-focused companies, having higher than average cash flow growth is even more crucial than for companies that have already reached maturity. Increased cash flow allows these companies to expand without relying heavily on expensive external financing.

Currently, Globus Medical boasts a year-over-year cash flow growth rate of 72.4%, significantly outperforming many of its industry peers. This is particularly notable compared to the industry average cash flow growth rate of -4.9%.

It's vital for investors to evaluate not just the current cash flow growth but also the historical data to gain context. Over the past three to five years, Globus Medical has maintained an annualized cash flow growth rate of 18.2%, far exceeding the industry average of 5.4%.

Positive Earnings Estimate Revisions

The trends in earnings estimate revisions can help confirm a stock's advantages in the aspects previously discussed. A trend of upward revisions is seen as an encouraging sign. Research has demonstrated a strong relationship between revisions in earnings estimates and subsequent movements in stock prices.

For Globus Medical, recent forward-looking earnings estimates have been positive, with the Zacks Consensus Estimate rising by 4.7% in the past month.

Conclusion

Overall, the upswing in earnings estimate revisions has contributed to Globus Medical achieving a Zacks Rank of #2, and its Growth Score of B reflects several positive indicators, including those mentioned above.

This combination of strong growth metrics positions Globus Medical as a compelling choice for growth investors looking for opportunities to enhance their portfolios.

Growth, Investors, Stocks