3 Reasons Why Vector (VGR) Is a Great Growth Stock

Growth stocks are attractive to many investors, as above-average financial growth helps these stocks easily grab the market's attention and produce exceptional returns. But finding a great growth stock is not easy at all.

In addition to volatility, these stocks carry above-average risk by their very nature. Also, one could end up losing from a stock whose growth story is actually over or nearing its end.

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.

Vector Group (VGR) is on the list of such stocks currently recommended by our proprietary system. In addition to a favorable Growth Score, it carries a top Zacks Rank.

Research shows that stocks carrying the best growth features consistently beat the market. And returns are even better for stocks that possess the combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Here are three of the most important factors that make the stock of this discount cigarette maker a great growth pick right now.

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. For growth investors, double-digit earnings growth is highly preferable, as it is often perceived as an indication of strong prospects (and stock price gains) for the company under consideration.

While the historical EPS growth rate for Vector is 5.4%, investors should actually focus on the projected growth. The company's EPS is expected to grow 17.7% this year, crushing the industry average, which calls for EPS growth of 2.1%.

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

Right now, Vector has an S/TA ratio of 1.29, which means that the company gets $1.29 in sales for each dollar in assets. Comparing this to the industry average of 0.95, 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 Vector looks attractive from a sales growth perspective as well. The company's sales are expected to grow 2.4% this year versus the industry average of 0%.

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 Vector have been revising upward. The Zacks Consensus Estimate for the current year has surged 19.7% over the past month.

Bottom Line

While the overall earnings estimate revisions have made Vector a Zacks Rank #2 stock, it has earned itself a Growth Score of A based on a number of factors, including the ones discussed above.

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

This combination positions Vector well for outperformance, so growth investors may want to bet on it.

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