Is Northern Trust (NTRS) a Solid Growth Stock? 3 Reasons to Think "Yes"

Growth stocks are particularly appealing to many investors due to their potential for above-average financial growth. This growth can capture the market's attention and lead to impressive returns. However, discovering a truly great growth stock can be challenging.

Growth stocks often come with heightened volatility and inherent risks. Investors may find themselves facing losses if a stock’s growth narrative is close to its climax or has already peaked.

To assist in identifying promising growth stocks, the Zacks Growth Style Score analyzes a company’s true growth potential beyond traditional metrics. According to this system, Northern Trust Corporation (NTRS) is currently showcased as a standout option.

Northern Trust possesses both a favorable Growth Score and a high Zacks Rank. Historical data support that stocks with strong growth characteristics tend to outperform the market, particularly those achieving a Growth Score of A or B, combined with a Zacks Rank of #1 (Strong Buy) or #2 (Buy).

Here are three key factors that suggest Northern Trust is a solid growth bet:

Earnings Growth

Earnings growth is a crucial factor as companies demonstrating significant profit increases usually attract more investors. For those interested in growth stocks, a double-digit earnings growth rate is highly desirable since it often indicates robust future prospects and potential stock price appreciation.

Northern Trust has a historical EPS (Earnings Per Share) growth rate of 1.2%. However, the spotlight should be placed on projected growth; the company's EPS is anticipated to expand by 16.5% this year, significantly outperforming the industry average of just 1.4%.

Impressive Asset Utilization Ratio

The asset utilization ratio, also known as the sales-to-total-assets (S/TA) ratio, is a significant yet often overlooked metric in growth investing. It reflects how efficiently a company is turning its assets into sales.

Currently, Northern Trust boasts an S/TA ratio of 0.1, indicating that the firm generates $0.1 in sales for every dollar in assets. This value is higher than the industry average of 0.06, showcasing Northern Trust’s efficiency in asset utilization.

Moreover, in terms of sales growth, Northern Trust is well-positioned. The company’s sales are projected to increase by 20.7% this year, contrasting with the industry average of -1.3%.

Promising Earnings Estimate Revisions

Another important consideration for investors is the trend in earnings estimate revisions. Positive revisions can often signal growing confidence in the company's future performance. Research has shown a strong correlation between earnings estimate revisions and stock price movements.

For Northern Trust, current-year earnings estimates have been upgraded recently, with the Zacks Consensus Estimate rising by 4% in just the past month.

Bottom Line

Based on the upward trend in earnings estimate revisions, Northern Trust has achieved a Zacks Rank of #2, indicating a Buy rating. Its Growth Score stands at B, derived from various encouraging metrics discussed.

In conclusion, this combination of factors points to Northern Trust as a potential outperformer and a compelling choice for growth-focused investors.

Stocks, Growth, Investment