3 Reasons Growth Investors Can't Ignore CareTrust REIT (CTRE)

Understanding Growth Stocks and Their Potential

Investors often look for growth stocks to take advantage of above-average growth in financials that can capture the market's attention and deliver exceptional returns. However, identifying a growth stock that truly meets its potential can be challenging. These stocks inherently carry higher risk and volatility, and if a company's growth story is reaching its peak, investing in it could lead to significant losses.

Despite these challenges, the process of finding cutting-edge growth stocks has become more manageable with tools like the Zacks Growth Style Score. This score, part of the Zacks Style Scores system, goes beyond traditional growth indicators to evaluate a company’s real growth prospects. One such stock currently recommended by this system is CareTrust REIT (CTRE), which not only has a favorable Growth Score but also holds a top Zacks Rank.

Research indicates that stocks with strong growth characteristics consistently outperform the market. The performance is even better when these stocks combine a Growth Score of A or B with a Zacks Rank of #1 (Strong Buy) or #2 (Buy). Here are three key factors that make CareTrust REIT an attractive growth investment at the moment.

Earnings Growth: A Key Indicator

Earnings growth is one of the most critical factors for investors. Stocks that show significant profit increases tend to draw attention from a wide range of investors. For growth investors, double-digit earnings growth is particularly appealing, as it often signals strong future prospects and potential stock price gains.

While CareTrust REIT’s historical EPS growth rate stands at 1.1%, investors should focus on the projected growth. The company’s EPS is expected to grow by 21.2% this year, far surpassing the industry average of 1.4%. This strong projection highlights the company’s potential for significant gains.

Cash Flow Growth: Fueling Expansion

Cash flow is essential for any business, but for growth-oriented companies, higher-than-average cash flow growth is especially crucial. It allows these companies to expand their operations without relying heavily on external financing.

CareTrust REIT currently shows a year-over-year cash flow growth of 67.6%, significantly higher than many of its peers and well above the industry average of 2.7%. Looking at historical data, the company’s annualized cash flow growth over the past 3-5 years has been 12.5%, compared to the industry average of 3.1%. This consistent growth underscores the company’s ability to sustain expansion and maintain financial health.

Promising Earnings Estimate Revisions

In addition to earnings and cash flow growth, investors should also pay attention to trends in earnings estimate revisions. Positive revisions often correlate with near-term stock price movements, making them a valuable indicator for investors.

CareTrust REIT has seen upward revisions in current-year earnings estimates. The Zacks Consensus Estimate for the current year has increased by 0.3% over the past month. This positive trend suggests that analysts are optimistic about the company’s future performance.

Conclusion

CareTrust REIT has earned a Growth Score of B based on various factors, including strong earnings and cash flow growth, as well as positive earnings estimate revisions. Additionally, the company holds a Zacks Rank #2, indicating a solid opportunity for growth investors.

Combining a favorable Growth Score with a strong Zacks Rank makes CareTrust REIT a potential outperformer in the current market. Investors looking for growth opportunities may find this stock worth considering.