Installed Building Products Expands Reach With Tatum Acquisition

Creating a portfolio with favorable liquidity stocks is likely to work in favor of investors seeking healthy returns. Liquidity measures a company’s capability to meet short-term debt obligations. Stocks with high liquidity levels have always been in demand, owing to their potential to provide maximum returns.

Investors can consider adding stocks like American Superconductor Corporation AMSC, Frontdoor, Inc. FTDR, Sezzle Inc. SEZL and Vimeo, Inc. VMEO to their portfolios to boost returns.

However, one should be careful when investing in a stock with a high liquidity level, as it may also indicate that the company is failing to utilize its assets efficiently.

Apart from sufficient cash in hand, investors might also consider a company’s capital deployment abilities before investing in its stock. A healthy company with favorable liquidity may prove to be a profitable pick for one’s portfolio.

Measures to Identify Liquid Stocks

Current Ratio: It measures current assets relative to current liabilities. The ratio gauges a company’s potential to meet short- and long-term debt obligations. A current ratio — the working capital ratio — below 1 indicates that the company has more liabilities than assets. A high current ratio does not always suggest that the company is in good financial shape. It may also indicate that the firm failed to utilize its assets significantly. Hence, a range of 1-3 is considered ideal.

Quick Ratio: Unlike the current ratio, the quick ratio — the “acid-test ratio” or “quick assets ratio” — indicates a company’s ability to pay short-term obligations. It considers inventory, excluding current assets relative to current liabilities. A quick ratio of more than 1 is desirable, like the current ratio.

Cash Ratio: This is the most conservative ratio among the three, considering cash and cash equivalents and invested funds relative to current liabilities. It measures a company’s ability to meet existing debt obligations using the most liquid assets. Though a cash ratio of more than 1 may suggest sound financials, a higher number may indicate inefficiency in cash utilization.

A ratio greater than 1 is always desirable but may not always represent a company’s financial condition.

Screening Parameters

To pick the best of the lot, we have added asset utilization — a widely used measure of a company’s efficiency — as one of the screening criteria. Asset utilization is the ratio of total sales in the past 12 months to the last four-quarter average of total assets. Though this ratio varies across industries, companies with a ratio higher than their industries can be considered efficient.

We added our proprietary Growth Style Score to the screen to ensure these liquid and efficient stocks have solid growth potential.

Current Ratio, Quick Ratio, and Cash Ratio between 1 and 3: While liquidity ratios greater than 1 are desirable, significantly high ratios may indicate inefficiency.

Asset utilization is more significant than the industry average: Higher asset utilization than the industry average indicates a company’s efficiency.

Zacks Rank equal to #1: Only Strong Buy-rated stocks can get through. You can see the complete list of today’s Zacks #1 Rank stocks here.

Growth Score less than or equal to B: Back-tested results show that stocks with a Growth Score of A or B handily beat other stocks when combined with a Zacks Rank #1 or 2 (Buy).

These criteria have narrowed the universe of more than 7,700 stocks to only five.

Here are four of the five stocks that qualified the screen:

American Superconductor Corporation is a provider of megawatt-scale power resiliency solutions. It develops and sells a wide range of products and solutions based on power electronic systems and high-temperature superconductor wires that improve the efficiency, reliability and quality of electricity during its generation, transmission, distribution and usage. It operates under two segments namely Grid and Wind.

In the last reported quarter, revenues came in at $54.5 million, up 60.3% year over year, driven by the acquisition of NWL and higher shipments of new energy power systems and electrical control system shipments. AMSC had $200 million in 12-month backlog and $300 million in total backlog.

Continued momentum across semiconductors, renewables, mining and metals and military end-markets bodes well. For the third quarter, AMSC expects revenues in the range of $55 million to $60 million.

The Zacks Consensus Estimate for fiscal 2024 earnings is pegged at 50 cents per share, up 61.3% in the past 30 days. The company has a Growth Score of A and a trailing four-quarter earnings surprise of 328.2%, on average.

Frontdoor is the parent company of home service plan brands consisting of American Home Shield, HSA, Landmark and OneGuard. The company's customizable home service plans help customers protect and maintain their homes from costly and unplanned breakdowns of essential home systems and appliances.

In the last reported quarter, revenues came in at $540 million, up 3% year over year. The uptick was driven by a 4% increase in price, which was partly offset by a 1% decline from reduced volume. Further, the number of first-year Direct-to-Consumer home warranties was 271,000, up 3% sequentially. Gross margin expanded 550 basis points to 57% for the third quarter of 2024. The expansion was mainly driven by higher price and a shift to higher service fees.

It also concluded a $400 million share repurchase authorization in August 2024 and initiated a new 3-year, $650 million buyback authorization in September 2024.

The Zacks Consensus Estimate for 2024 earnings is pegged at $3.14 cents per share, up 12.5% in the past 30 days. FTDR has a Growth Score of B and a trailing four-quarter earnings surprise of 269%, on average.

Sezzle is a fintech company that operates a digital payment platform mainly across the United States and Canada. This platform offers customers interest-free installment plans at online stores and certain in-store locations. In the last reported quarter, revenues jumped 71.3% year over year due to an increasing subscriber base. As of Sept. 30, 2024, SEZL had 529,000 active subscribers across Anywhere and Premium platforms.

Management raised the top and bottom-line outlook for 2024 owing to strong growth and the inclusion of the newly launched banking program with WebBank. It expects total revenue growth of 55% compared with 35-40% mentioned earlier. Earnings per share are expected to be $12.05 compared with $9.25 stated earlier. The Zacks Consensus Estimate for 2024 earnings is pegged at $6.71 per share, unchanged in the past 60 days. The company has a Growth Score of A.

Vimeo provides video software solutions. The company's platform enables any professional, team and organization to unlock the power of video to create, collaborate and communicate. It has a more than 300-million strong user base. In the last reported quarter, revenues came in at $105 million, slightly down from $106 million reported in the prior-year quarter. Subscribers were up 26%, while average revenue per user was up 11% year over year.

The Zacks Consensus Estimate for 2024 earnings is pegged at earnings 14 cents per share, suggesting an improvement of 75% in the past 60 days. VMEO has a Growth Score of B.

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Disclosure: Officers, directors and 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 mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies is available at: https://www.zacks.com/performance.

Zacks Investment Research

Top Wall Street analysts changed their outlook on these top names. For a complete view of all analyst rating changes, including upgrades and downgrades, please see our analyst ratings page.

• Piper Sandler analyst Charles Neivert downgraded the rating for Celanese Corporation from Neutral to Underweight and lowered the price target from $150 to $98. Celanese shares closed at $89.72 on Thursday. See how other analysts view this stock.
• Macquarie analyst Paul Golding downgraded Planet Fitness, Inc. from Outperform to Neutral but raised the price target from $91 to $99. Planet Fitness shares closed at $94.17 on Thursday. See how other analysts view this stock.
• RBC Capital analyst Mike Dahl downgraded the rating for Installed Building Products, Inc. from Sector Perform to Underperform and lowered the price target from $203 to $197. Installed Building Prods shares closed at $217.27 on Thursday. See how other analysts view this stock.
• Barclays analyst Adrienne Yih downgraded Bath & Body Works, Inc. from Equal-Weight to Underweight and lowered the price target from $31 to $28. Bath & Body Works shares closed at $31.75 on Thursday. See how other analysts view this stock.
• William Blair analyst Matt Larew downgraded the rating for Maravai LifeSciences Holdings, Inc. from Outperform to Market Perform. Maravai LifeSciences shares closed at $7.84 on Thursday. See how other analysts view this stock.

Considering buying CE stock? Here’s what analysts think:

Here are three stocks with buy rank and strong momentum characteristics for investors to consider today, November 7th:

Kura Sushi USA, Inc. KRUS: This Japanese restaurant chain has a Zacks Rank #1 and witnessed the Zacks Consensus Estimate for its current year earnings increasing 21.2% over the last 60 days.

Kura Sushi USA, Inc. Price and Consensus

Kura Sushi USA, Inc. price-consensus-chart | Kura Sushi USA, Inc. Quote

Kura Sushi’s shares gained 78.4% over the last three months compared with the S&P 500’s advance of 11.3%. The company possesses a Momentum Score of A.

Kura Sushi USA, Inc. Price

Kura Sushi USA, Inc. price | Kura Sushi USA, Inc. Quote

Frontdoor, Inc. FTDR: This home warranties company has a Zacks Rank #1 and witnessed the Zacks Consensus Estimate for its current year earnings increasing 5.7% over the last 60 days.

Frontdoor Inc. Price and Consensus

Frontdoor Inc. price-consensus-chart | Frontdoor Inc. Quote

Frontdoor’ shares gained 28.2% over the last three months compared with the S&P 500’s advance of 11.3%. The company possesses a Momentum Score of A.

Frontdoor Inc. Price

Frontdoor Inc. price | Frontdoor Inc. Quote

LivaNova PLC LIVN: This medical device company has a Zacks Rank #1 and witnessed the Zacks Consensus Estimate for its current year earnings increasing nearly 7% over the last 60 days.

LivaNova PLC Price and Consensus

LivaNova PLC price-consensus-chart | LivaNova PLC Quote

LivaNova’s shares gained 15.8% over the last three months compared with the S&P 500’s advance of 11.3%. The company possesses a Momentum Score of A.

LivaNova PLC Price

LivaNova PLC price | LivaNova PLC Quote

See the full list of top ranked stocks here

Learn more about the Momentum score and how it is calculated here.

Zacks Investment Research

Installed Building Products (IBP) came out with quarterly earnings of $2.85 per share, missing the Zacks Consensus Estimate of $2.98 per share. This compares to earnings of $2.79 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of -4.36%. A quarter ago, it was expected that this residential insulation installer would post earnings of $2.89 per share when it actually produced earnings of $3.02, delivering a surprise of 4.50%.

Over the last four quarters, the company has surpassed consensus EPS estimates three times.

Installed Building Products, which belongs to the Zacks Building Products - Miscellaneous industry, posted revenues of $760.6 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 0.36%. This compares to year-ago revenues of $706.47 million. The company has topped consensus revenue estimates three times over the last four quarters.

The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call.

Installed Building Products shares have added about 24.5% since the beginning of the year versus the S&P 500's gain of 24.3%.

What's Next for Installed Building Products?

While Installed Building Products has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Installed Building Products: unfavorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #4 (Sell) for the stock. So, the shares are expected to underperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $3.04 on $781.84 million in revenues for the coming quarter and $11.42 on $2.97 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Building Products - Miscellaneous is currently in the top 37% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Another stock from the same industry, Construction Partners (ROAD), has yet to report results for the quarter ended September 2024.

This road and highway construction company is expected to post quarterly earnings of $0.57 per share in its upcoming report, which represents a year-over-year change of -3.4%. The consensus EPS estimate for the quarter has been revised 5.9% lower over the last 30 days to the current level.

Construction Partners' revenues are expected to be $537.5 million, up 13.2% from the year-ago quarter.

Zacks Investment Research

Here are five stocks added to the Zacks Rank #1 (Strong Buy) List today:

Moody's Corporation MCO: This integrated risk assessment firm has seen the Zacks Consensus Estimate for its current year earnings increasing 6.3% over the last 60 days.

Moody's Corporation Price and Consensus

Moody's Corporation price-consensus-chart | Moody's Corporation Quote

Emergent BioSolutions Inc. EBS: This life sciences company has seen the Zacks Consensus Estimate for its current year earnings increasing 34.3% over the last 60 days.

Emergent Biosolutions Inc. Price and Consensus

Emergent Biosolutions Inc. price-consensus-chart | Emergent Biosolutions Inc. Quote

LivaNova PLC LIVN: This medical device company has seen the Zacks Consensus Estimate for its current year earnings increasing nearly 7% over the last 60 days.

LivaNova PLC Price and Consensus

LivaNova PLC price-consensus-chart | LivaNova PLC Quote

Frontdoor, Inc. FTDR: This home warranties company has seen the Zacks Consensus Estimate for its current year earnings increasing 5.7% over the last 60 days.

Frontdoor Inc. Price and Consensus

Frontdoor Inc. price-consensus-chart | Frontdoor Inc. Quote

Kura Sushi USA, Inc. KRUS: This Japanese restaurant chain has seen the Zacks Consensus Estimate for its current year earnings increasing 21.2% over the last 60 days.

Kura Sushi USA, Inc. Price and Consensus

Kura Sushi USA, Inc. price-consensus-chart | Kura Sushi USA, Inc. Quote

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment Research

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. However, it isn't easy to find a great growth stock.

That's because, these stocks usually carry above-average risk and volatility. In fact, betting on a stock for which the growth story is actually over or nearing its end could lead to significant loss.

However, the task of finding cutting-edge growth stocks is made easy 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.

Frontdoor (FTDR) is one such stock that our proprietary system currently recommends. The 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 home services provider is a great growth pick right now, we have highlighted three of the most important factors below:

Earnings Growth

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.

While the historical EPS growth rate for Frontdoor is 4.8%, investors should actually focus on the projected growth. The company's EPS is expected to grow 28% this year, crushing the industry average, which calls for EPS growth of 10%.

Impressive Asset Utilization Ratio

Growth investors often overlook asset utilization ratio, also known as sales-to-total-assets (S/TA) ratio, but it is an important feature of a real growth stock. This metric shows how efficiently a firm is utilizing its assets to generate sales.

Right now, Frontdoor has an S/TA ratio of 1.57, which means that the company gets $1.57 in sales for each dollar in assets. Comparing this to the industry average of 0.89, it can be said that the company is more efficient.

In addition to efficiency in generating sales, sales growth plays an important role. And Frontdoor looks attractive from a sales growth perspective as well. The company's sales are expected to grow 2.7% 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 Frontdoor have been revising upward. The Zacks Consensus Estimate for the current year has surged 5.6% over the past month.

Bottom Line

Frontdoor has not only earned a Growth Score of A based on a number of factors, including the ones discussed above, but it also carries a Zacks Rank #2 because of the positive earnings estimate revisions.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

This combination indicates that Frontdoor is a potential outperformer and a solid choice for growth investors.

Zacks Investment Research