3 Reasons Why Growth Investors Shouldn't Overlook Globus Medical (GMED)

Growth investors are always on the lookout for promising stocks that exhibit above-average growth potential in their financials. These stocks tend to attract significant market interest and can lead to impressive returns. However, pinpointing a stock that can truly maximize its potential is often challenging.

Investing in growth stocks often comes with volatility and heightened risk. Investors may worry about investing in a company whose growth trajectory is either peaking or coming to an end.

Fortunately, tools like the Zacks Growth Style Score can simplify the search for high-potential growth stocks. This system examines factors beyond the standard growth metrics to evaluate a company's genuine growth opportunities.

Among the stocks currently recommended by this system is Globus Medical (GMED - Free Report). This medical device company not only boasts a favorable Growth Score but also holds a strong Zacks Rank.

Research indicates that stocks with superior growth characteristics consistently outperform broader markets. The most significant gains are often found in stocks combining a Growth Score of A or B with a Zacks Rank of #1 (Strong Buy) or #2 (Buy).

Here are three compelling reasons why Globus Medical stands out as an outstanding growth investment right now.

Earnings Growth

One of the most critical factors for investors is earnings growth. Rapid increases in profit levels are usually what investors aim for. For growth investors, double-digit earnings growth is particularly attractive as it suggests strong future prospects and potential stock price appreciation.

Globus Medical has a historical earnings per share (EPS) growth rate of 14.2%. However, what truly captures attention is the projected growth, where the company’s EPS is expected to rise by 28.4% this year—significantly higher than the industry average of 16.5%.

Cash Flow Growth

Cash flow is crucial for any business, but robust cash flow growth is especially vital for growth-oriented companies. Such firms rely on this cash for expansion without incurring high costs associated with outside funding.

Currently, Globus Medical displays impressive year-over-year cash flow growth of 72.4%, a figure that far exceeds many of its competitors and stands in stark contrast to the industry average of -4.9%.

While present cash flow growth is essential, examining historical performance provides valuable insight. Over the past 3-5 years, Globus Medical has achieved an annualized cash flow growth rate of 18.2%, compared to the industry average of 5.4%.

Favorable Earnings Estimate Revisions

The performance of a stock can also be assessed through trends in earnings estimate revisions. A positive trend is indicative of good prospects. Empirical evidence shows a strong link between the direction of earnings estimate revisions and changes in stock prices.

For Globus Medical, recent revisions have been upward for the current year's earnings estimates. The Zacks Consensus Estimate has increased by 4.7% over the past month, reflecting growing confidence in the company's performance.

Final Thoughts

Thanks to favorable earnings estimate revisions, Globus Medical holds a Zacks Rank of #2 and boasts a Growth Score of B. These characteristics highlight the company’s potential for outperformance, making it a highly appealing option for growth investors.

Investing, Growth, Stocks