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

Growth stocks attract investors due to their above-average financial growth, which can lead to outstanding returns. However, identifying top growth stocks can be a challenge.

These stocks often come with higher volatility and risk, and there's a chance you might invest in a company that is past its peak growth phase. To make this process easier, the Zacks Growth Style Score evaluates companies' growth prospects more comprehensively than traditional metrics.

Northern Trust Corporation (NTRS) has emerged as a stock that fits well within this growth framework. It holds a strong Zacks Growth Score and is rated highly in terms of its overall performance.

Research indicates that stocks showcasing superior growth characteristics tend to surpass market performance. Furthermore, those stocks with a Growth Score of A or B paired with a Zacks Rank of #1 (Strong Buy) or #2 (Buy) tend to yield even better returns.

Here are three key reasons why Northern Trust is viewed as an excellent growth investment at present.

Earnings Growth

Earnings growth is a crucial factor when evaluating stocks, as significant increases in profits often catch investor interest. For growth investors, firms that report double-digit earnings growth are especially appealing, indicating robust future potential and likely increases in stock prices.

While Northern Trust has a historical earnings per share (EPS) growth rate of just 1.2%, the focus should be on projected growth. The company’s EPS is anticipated to grow by an impressive 16.5% this year, which significantly outpaces the industry average of 1.4%.

Effective Asset Utilization Ratio

Asset utilization, measured by the sales-to-total-assets (S/TA) ratio, is often overlooked but is vital for growth investing. This metric indicates how efficiently a company uses its assets to generate sales.

Northern Trust currently boasts an S/TA ratio of 0.1, implying the company generates $0.1 in sales for each dollar of assets. This efficiency surpasses the industry average of 0.06.

In addition to being efficient in asset use, Northern Trust shows promise in sales growth. The company’s sales are anticipated to surge by 20.7% this year, compared to the industry, which expects a decline of 1.3%.

Favorable Earnings Estimate Revisions

Another area worth exploring is the trend of earnings estimate revisions. Research shows that positive changes in earnings estimates often correlate with stock price movement.

Currently, Northern Trust’s earnings estimates for this year have been revised upward, with the Zacks Consensus Estimate climbing by 4% over the past month.

Conclusion

With positive revisions in earnings estimates, Northern Trust is rated as a Zacks Rank #2 stock and has earned a Growth Score of B due to several favorable financial metrics discussed here.

This combination indicates that Northern Trust is positioned to be a strong performer and a reliable choice for growth investors.

Growth, Stocks, Investing