Growth investors are on the lookout for stocks that demonstrate above-average financial growth, as these tend to capture market attention and deliver strong returns. However, identifying a standout growth stock can be challenging due to the inherent risks and volatility associated with such securities. Moreover, investing in a company whose growth story is concluding could result in significant losses.

The Growth Style Score, a component of the Style Scores system, goes beyond traditional growth attributes to assess a company’s genuine growth prospects, simplifying the process of finding cutting-edge growth stocks.

Nvidia (NASDAQ:NVDA) stands out as one such stock currently recommended by our proprietary system. The company not only boasts a favorable Growth Score but also holds a top Rank.

Research indicates that stocks with robust growth characteristics consistently outperform the market. 

Here are three key factors contributing to the attractiveness of this graphics chips manufacturer for gaming and artificial intelligence as a prime growth pick.

1. Earnings Growth: Earnings growth is arguably the most crucial factor, as stocks with surging profit levels tend to attract investor attention. For growth investors, double-digit earnings growth is particularly favorable, often signaling strong prospects and potential stock price gains. Nvidia’s historical EPS growth rate is an impressive 39.9%, but what truly stands out is the projected growth. The company’s EPS is anticipated to surge by 268.4% this year, outpacing the industry average, which forecasts EPS growth of -2.8%.

2. Impressive Asset Utilization Ratio: The asset utilization ratio, or sales-to-total-assets (S/TA) ratio, is a vital yet often overlooked indicator in growth investing. It reveals how efficiently a company is using its assets to generate sales. Currently, Nvidia boasts an S/TA ratio of 0.95, indicating that the company generates $0.95 in sales for every dollar in assets. Comparatively, the industry average is 0.74, underscoring Nvidia’s superior efficiency. Additionally, Nvidia is well-positioned for sales growth, with a projected increase of 118.4% this year compared to the industry average of 5.2%.

3. Promising Earnings Estimate Revisions: Beyond the aforementioned metrics, investors should consider the trend in earnings estimate revisions, with a positive trend being advantageous. Research indicates a strong correlation between trends in earnings estimate revisions and short-term stock price movements. Nvidia has witnessed upward revisions in current-year earnings estimates, with the Consensus Estimate for the current year surging by 0.1% over the past month.

Bottom Line: Investors may find these factors compelling as they evaluate Nvidia for inclusion in their growth-oriented portfolios.

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