Top 3 Stocks With Strong Earnings Acceleration to Buy

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. But finding a growth stock that can live up to its true potential can be a tough task.

By their very nature, these stocks carry above-average risk and volatility. Moreover, if a company's growth story is over or nearing its end, betting on it could lead to significant loss.

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.

Our proprietary system currently recommends BrightSphere Investment Group (BSIG) as one such stock. This 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 asset manager is a great growth pick right now, we have highlighted three of the most important factors below:

Earnings Growth

Earnings growth is arguably the most important factor, as stocks exhibiting exceptionally surging profit levels tend to attract the attention of most investors. 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 BrightSphere Investment Group is 2.9%, investors should actually focus on the projected growth. The company's EPS is expected to grow 45.5% this year, crushing the industry average, which calls for EPS growth of 12.5%.

Impressive Asset Utilization Ratio

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 shows how efficiently a firm is utilizing its assets to generate sales.

Right now, BrightSphere Investment Group has an S/TA ratio of 0.84, which means that the company gets $0.84 in sales for each dollar in assets. Comparing this to the industry average of 0.23, it can be said that the company is more efficient.

While the level of efficiency in generating sales matters a lot, so does the sales growth of a company. And BrightSphere Investment Group looks attractive from a sales growth perspective as well. The company's sales are expected to grow 16.6% this year versus the industry average of 1.2%.

Promising Earnings Estimate Revisions

Beyond the metrics outlined above, investors should consider the trend in earnings estimate revisions. A positive trend is a plus here. Empirical research shows that there is a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

There have been upward revisions in current-year earnings estimates for BrightSphere Investment Group. The Zacks Consensus Estimate for the current year has surged 7.9% over the past month.

Bottom Line

BrightSphere Investment Group has not only earned a Growth Score of B based on a number of factors, including the ones discussed above, but it also carries a Zacks Rank #1 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 positions BrightSphere Investment Group well for outperformance, so growth investors may want to bet on it.

Zacks Investment Research

Investors interested in Finance stocks should always be looking to find the best-performing companies in the group. Is BrightSphere Investment Group (BSIG) one of those stocks right now? By taking a look at the stock's year-to-date performance in comparison to its Finance peers, we might be able to answer that question.

BrightSphere Investment Group is one of 871 companies in the Finance group. The Finance group currently sits at #1 within the Zacks Sector Rank. The Zacks Sector Rank considers 16 different groups, measuring the average Zacks Rank of the individual stocks within the sector to gauge the strength of each group.

The Zacks Rank is a successful stock-picking model that emphasizes earnings estimates and estimate revisions. The system highlights a number of different stocks that could be poised to outperform the broader market over the next one to three months. BrightSphere Investment Group is currently sporting a Zacks Rank of #1 (Strong Buy).

The Zacks Consensus Estimate for BSIG's full-year earnings has moved 12.1% higher within the past quarter. This means that analyst sentiment is stronger and the stock's earnings outlook is improving.

Based on the most recent data, BSIG has returned 63.1% so far this year. Meanwhile, the Finance sector has returned an average of 27% on a year-to-date basis. This means that BrightSphere Investment Group is outperforming the sector as a whole this year.

One other Finance stock that has outperformed the sector so far this year is Camden National (CAC). The stock is up 27.1% year-to-date.

For Camden National, the consensus EPS estimate for the current year has increased 5.6% over the past three months. The stock currently has a Zacks Rank #1 (Strong Buy).

To break things down more, BrightSphere Investment Group belongs to the Financial - Investment Management industry, a group that includes 37 individual companies and currently sits at #25 in the Zacks Industry Rank. This group has gained an average of 44.1% so far this year, so BSIG is performing better in this area.

In contrast, Camden National falls under the Banks - Northeast industry. Currently, this industry has 78 stocks and is ranked #45. Since the beginning of the year, the industry has moved +8.4%.

Investors interested in the Finance sector may want to keep a close eye on BrightSphere Investment Group and Camden National as they attempt to continue their solid performance.

Zacks Investment Research

Euronet Worldwide, Inc. EEFT is currently aided by strong segmental contribution, an enhanced payment solutions suite, acquisitions and a notable financial stand.

Zacks Rank & Price Rally

Euronet currently carries a Zacks Rank #3 (Hold).

The stock has gained 20% in the past year.

Have you been paying attention to shares of BrightSphere Investment Group (BSIG)? Shares have been on the move with the stock up 17.3% over the past month. The stock hit a new 52-week high of $30.77 in the previous session. BrightSphere Investment Group has gained 59.3% since the start of the year compared to the 24.5% move for the Zacks Finance sector and the 41.1% return for the Zacks Financial - Investment Management industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on October 31, 2024, BrightSphere Investment Group reported EPS of $0.59 versus consensus estimate of $0.52 while it beat the consensus revenue estimate by 7.09%.

For the current fiscal year, BrightSphere Investment Group is expected to post earnings of $2.59 per share on $497.42 million in revenues. This represents a 45.51% change in EPS on a 16.6% change in revenues. For the next fiscal year, the company is expected to earn $2.90 per share on $530.45 million in revenues. This represents a year-over-year change of 11.97% and 6.64%, respectively.

Valuation Metrics

BrightSphere Investment Group may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

BrightSphere Investment Group has a Value Score of B. The stock's Growth and Momentum Scores are B and C, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 11.8X current fiscal year EPS estimates, which is not in-line with the peer industry average of 12.7X. On a trailing cash flow basis, the stock currently trades at 13.6X versus its peer group's average of 11.4X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, BrightSphere Investment Group currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if BrightSphere Investment Group meets the list of requirements. Thus, it seems as though BrightSphere Investment Group shares could have a bit more room to run in the near term.

How Does BSIG Stack Up to the Competition?

Shares of BSIG have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Federated Hermes, Inc. (FHI). FHI has a Zacks Rank of # 1 (Strong Buy) and a Value Score of A, a Growth Score of C, and a Momentum Score of C.

Earnings were strong last quarter. Federated Hermes, Inc. beat our consensus estimate by 15.22%, and for the current fiscal year, FHI is expected to post earnings of $4.23 per share on revenue of $1.63 billion.

Shares of Federated Hermes, Inc. have gained 8.1% over the past month, and currently trade at a forward P/E of 13.26X and a P/CF of 10.86X.

The Financial - Investment Management industry is in the top 9% of all the industries we have in our universe, so it looks like there are some nice tailwinds for BSIG and FHI, even beyond their own solid fundamental situation.

Zacks Investment Research