NYSE:CVX Chevron Corporation
Is Chevron ( CVX ) a Solid Growth Stock? 3 Reasons to Think " Yes "
Zacks Equity Research April 13, 2022
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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 growth stock that can live up to its true potential can be a tough task.
In addition to , 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, the task of finding cutting-edge growth stocks is made easy 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.
CVX - Free Report) 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.
Studies have shown that stocks with the best growth features consistently outperform the market. And for stocks that have a combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy), returns are even better.
Here are three of the most important factors that make the stock of this oil company a great growth pick right now.
Arguably nothing is more important than growth, as surging profit levels is what most investors are after. And for growth investors, double-digit growth is definitely preferable, and often an indication of strong prospects (and stock price gains) for the company under consideration.
While the historical EPS growth rate for Chevron is 2.7%, investors should actually focus on the projected growth. The company's EPS is expected to grow 82.5% this year, crushing the industry average, which calls for EPS growth of 71.7%.
Cash Flow Growth
Cash is the lifeblood of any business, but higher-than-average cash flow growth is more beneficial and important for growth-oriented companies than for mature companies. That's because, high cash accumulation enables these companies to undertake new projects without raising expensive outside funds.
Right now, year-over-year cash flow growth for Chevron is 75.2%, which is higher than many of its peers . In fact, the rate compares to the industry average of 47.7%.
While investors should actually consider the current cash flow growth, it's worth taking a look at the historical rate too for putting the current reading into proper perspective. The company's annualized cash flow growth rate has been 9.5% over the past 3-5 years versus the industry average of 7.9%.
Promising Estimate Revisions
Superiority of a stock in terms of the metrics outlined above can be further validated by looking at the trend in estimate revisions. A positive trend is of course favorable here. Empirical research shows that there is a strong correlation between trends in estimate revisions and near-term stock price movements.
There have been upward revisions in current-year estimates for Chevron . The Zacks Consensus Estimate for the current year has surged 15.9% over the past month.
Chevron has not only earned a Growth Score of A based on a number of factors, including the ones discussed above, but it also carries a Zacks Rank #2 because of the positive estimate revisions.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
This combination positions Chevron well for outperformance, so growth investors may want to bet on it.