Where’s the Growth?

03/15/2016 8:00 am EST


Richard Moroney

Editor, Dow Theory Forecasts

Investors today are asking, “Where’s the growth?” Among the 844 companies in the S&P small can mid cap indexes that reported December-quarter results, average per-share earnings dipped 0.4%, asserts Richard Moroney, Editor of Upside.

Estimate revision trends are also gloomy—about 61% of S&P 400 and S&P 600 stocks have seen profit estimates revised lower over the last three months.

The good news is that sales and earnings still look healthy for certain sectors. Pairing sector data with exhaustive individual company analysis helps us identify standout growers, such as these three Best Buy recommendations.

We upgraded AMN Healthcare Services (AHS) after it reported an impressive December quarter.  Sales in the core nurse and healthcare staffing unit jumped 51%.

The company saw more demand than it could fill because of shortages of clinical workers.

The stock trades at a reasonable 19 times trailing earnings. The P/E drops to 14 using estimated current-year earnings.

For full-year 2016, the consensus calls for growth of 24% for revenue and 26% for per-share profits.

Banc of California (BANC) offers an attractive blend of low valuation and strong operating momentum, particularly for a bank.

It scores above 85 in our Quadrix rating system for both Momentum and Value, a feat matched by just 14 of the 396 regional banks in our research universe.

Analysts expect per-share-profit growth of 13% this year, compared to the average of 7% for regional banks.

Over the next five years, per-share profits are expected to grow more than 12% annually, versus 9% for the industry.

The shares have rallied 46% over the past year and trade near a five-year high. Yet the stock seems reasonably valued at 12 times trailing earnings. The stock is a best buy.

Universal Forest Products (UFPI) appears positioned for further gains, fueled by profit momentum.

Universal Forest Products supplies wood and building products to the retail, housing, and commercial construction markets.

Leading market positions, product launches, and a healthy housing environment should help drive near-term results.

A strong balance sheet and rising free cash flow should help sustain growth. Only two analysts offer profit estimates.

2016 earnings are expected to advance 10% to $4.40 per share—a conservative figure, in our view. Universal is a best buy.

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