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Retail Sales Dip: 5 Stocks that Still Promise Growth

Zacks

At one end where a rebound in oil prices, higher consumer confidence and a gradual improvement in the housing market signal that the economy is on a recovery mode, on the other end, a dip in August retail sales has cast a doubt about the same. The dismal sales report came on the heels of soft job addition and contraction in the manufacturing and service sectors witnessed last month. Undoubtedly, these economic indicators leave us perplexed. (Read: Retail Sales Dip in August: Another Blow to Fed Rate Hike)

It is quite apparent that the market has witnessed a slew of events and it would be difficult to fetch higher returns amid such an investment climate. Instead of waiting for a convincing economic environment and pondering over the Fed’s decision over the rate hike, be a front-runner by identifying stocks that have the potential to outperform even when market conditions are not congenial.

Where to Focus?

Try to adopt strategies to ascertain above-market returns. To stay ahead of the curve, we need to pick stocks with strong growth potential. Target “Growth Stocks”. These are generally hot and flourishing stocks with earnings growth potential.


We have identified 5 Retail-Wholesale Stocks based on a favorable combination of a Zacks Rank #1 (Strong Buy) or 2 (Buy), and a Growth Style Score of “A” or “B”. These stocks are backed by sound fundamentals, surging share price and a track record of better-than-expected results.

5 Prominent Picks

We suggest investing in The Children's Place, Inc. PLCE, with a long-term earnings growth rate of 10.3% and a Growth Score of “A”. This specialty retailer of children's apparel delivered an average positive earnings surprise of 33.1% over the trailing four quarters. It is expected to witness earnings growth of 30.4% in fiscal 2016 and 10.7% in fiscal 2017. The Zacks Consensus Estimate too has been on the rise over the past 60 days. Notably, the stock has soared about 50% year to date and flaunts a Zacks Rank #1.

Investors can count on Urban Outfitters Inc. URBN, a lifestyle specialty retail company that posted an average positive earnings surprise of 6.7% over the trailing four quarters and has a Growth Score of “A”. The company is expected to witness earnings growth of 16.1% in fiscal 2017 and 9.1% in fiscal 2018. The Zacks Consensus Estimate has moved north over the past 60 days. Also, the stock has surged roughly 57% so far this year. The stock has a long-term earnings growth rate of 15%, with a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington Stores, Inc. BURL, retailer of branded apparel products, is a solid bet, with a Zacks Rank #2 and a Growth Score of “A”. The company delivered an average positive earnings surprise of 16.1% over the trailing four quarters and has a long-term earnings growth rate of 18.4%. It is expected to witness earnings growth of 29.1% in fiscal 2016 and 18.1% in fiscal 2017. The Zacks Consensus Estimate too has been trending up over the past 60 days. The company has witnessed a massive run in the stock market, with its share price up approximately 94% so far this year.

Another stock that investors may consider is Big Lots Inc. BIG with a Zacks Rank #2, a long-term earnings growth rate of 13.5% and a Growth Score of “A”. The company delivered an average positive earnings surprise of 8% over the trailing four quarters. It is expected to witness earnings growth of 18.8% in fiscal 2016 and 10.7% in fiscal 2017. The Zacks Consensus Estimate too has been on the rise over the past 60 days. Shares of this discount retailer have advanced about 23% in the past one month.

Last but not the least is Papa John's International Inc. PZZA, with a Zacks Rank #2, long-term earnings growth rate of 15.5% and a Growth Score of “A”. The company, which operates and franchises pizza delivery and carryout restaurants under the Papa Johns trademark, posted an average positive earnings surprise of 7.8% over the trailing four quarters. It is expected to witness solid earnings growth of 17.4% in 2016 and 11.4% in 2017. The Zacks Consensus Estimate too has been on the rise over the past 60 days. The stock has surged roughly 39% year to date.

Endnote

While these five stocks are not the end of the road, with the help of the Zacks Stock Screener and permutation and combination, you can find out stocks that have the potential to beat the market.

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