Is Northern Trust (NTRS) a Strong Growth Stock? Here are 3 Reasons to Think So

Growth stocks have a special appeal for investors, primarily because of their potential for above-average financial performance. These stocks often attract significant market interest, leading to impressive returns. However, identifying a reliable growth stock can be quite challenging.

These growth stocks are inevitably associated with high volatility and risk. Investors run the risk of investing in a stock whose growth trajectory may be stagnating or nearing its end.

The Zacks Growth Style Score, which is part of the Zacks Style Scores system, helps in pinpointing quality growth stocks by analyzing their actual growth potential instead of just traditional metrics.

Currently, Northern Trust Corporation (NTRS) stands out as a strong candidate among growth stocks. It not only boasts a good Growth Score but also holds a high Zacks Rank.

Research indicates that stocks showcasing optimal growth characteristics consistently deliver better market performance. In particular, stocks with a Growth Score of A or B alongside a Zacks Rank of #1 (Strong Buy) or #2 (Buy) tend to provide even more impressive returns.

Here are three compelling reasons why Northern Trust is considered an excellent growth stock right now.

1. Strong Earnings Growth

Earnings growth is a vital factor when evaluating growth stocks. Companies that display strong profit increases are more likely to capture investor interest. For growth investors, double-digit earnings growth is particularly attractive, often signaling future stock price appreciation.

Northern Trust's historical earnings per share (EPS) growth rate has been 1.2%. However, looking ahead reveals a much brighter picture, with the company's EPS projected to grow by 16.5% this year, far surpassing the industry average of just 1.4%.

2. Excellent Asset Utilization Ratio

The asset utilization ratio, or sales-to-total-assets (S/TA) ratio, is a crucial yet often overlooked metric in growth investing. This ratio indicates how effectively a company uses its assets to generate sales.

Currently, Northern Trust has an S/TA ratio of 0.1, meaning that it generates $0.10 in sales for every dollar of assets. This performance outpaces the industry average of 0.06, highlighting Northern Trust's efficiency.

In addition to efficiency, sales growth is essential. Northern Trust is expected to experience sales growth of 20.7% this year, while the industry at large is projected to see a decline of 1.3%.

3. Positive Earnings Estimate Revisions

A positive trend in earnings estimate revisions should also be a consideration for investors. Historical data shows a strong correlation between the trajectory of earnings estimate revisions and short-term stock performance.

Northern Trust has seen its current-year earnings estimates trend upward recently, with the Zacks Consensus Estimate for the current year increasing by 4% over the past month.

Conclusion

With its positive momentum in earnings estimate revisions, Northern Trust currently holds a Zacks Rank of #2, demonstrating its potential as a growth stock. Additionally, it has earned a Growth Score of B based on various impressive metrics.

All these elements suggest that Northern Trust has the potential to outperform the market, making it an attractive option for growth investors.

growth, stocks, earnings