3 Reasons Why BioMarin (BMRN) Leaps Ahead of Peers as Top Growth Stock
Growth Investors Can Find Solid Returns with BioMarin Pharmaceutical
Growth investors focus on stocks that are seeing above-average financial growth, as this feature helps these securities garner the market’s attention and deliver solid returns. However, finding a growth stock that can live up to its true potential can be a challenging task.
In addition to volatility, these stocks carry above-average risk by their very nature. Moreover, one could end up losing from a stock whose growth story is actually over or nearing its end. Therefore, it’s essential for investors to carefully evaluate the growth prospects of any stock before investing in it.
Fortunately, with the help of the Zacks Growth Style Score (part of the Zacks Style Scores system), investors can easily identify cutting-edge growth stocks that have a high potential for delivering solid returns. This proprietary system looks beyond the traditional growth attributes to analyze a company’s real growth prospects.
BioMarin Pharmaceutical: A Top Pick with Strong Growth Prospects
BioMarin Pharmaceutical (BMRN) is one of the stocks currently recommended by our proprietary system, along with a favorable Growth Score and a top Zacks Rank. Our studies have shown that stocks with the best growth features consistently outperform the market.
For instance, stocks with a combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy) tend to deliver better returns than those without these favorable characteristics. This is because companies with strong earnings growth, cash flow growth, and positive earnings estimate revisions are more likely to outperform the market.
Earnings Growth: A Key Driver of BioMarin’s Success
One of the most important factors that make BioMarin a great growth pick right now is its earnings growth. Earnings growth is arguably the most critical factor for growth investors, as stocks exhibiting exceptionally surging profit levels tend to attract the attention of most investors.
For growth investors, double-digit earnings growth is highly preferable, as it is often perceived as an indication of strong prospects (and stock price gains) for the company under consideration. While the historical EPS growth rate for BioMarin is 40.9%, investors should actually focus on the projected growth.
The company’s EPS is expected to grow 23% this year, crushing the industry average, which calls for EPS growth of 19.7%. This significant earnings growth rate indicates that BioMarin has a strong potential for delivering solid returns in the near future.
Cash Flow Growth: A Key Indicator of BioMarin’s Health
In addition to earnings growth, cash flow growth is another essential factor that investors should consider when evaluating a company’s growth prospects. 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 BioMarin is 83.6%, which is higher than many of its peers. In fact, the rate compares to the industry average of -4.7%.
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 40.1% over the past 3-5 years versus the industry average of 4.1%.
Promising Earnings Estimate Revisions
Another key factor that investors should consider is the trend in earnings estimate revisions. A positive trend is a plus here, as empirical research shows that there is a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
The current-year earnings estimates for BioMarin have been revising upward. The Zacks Consensus Estimate for the current year has surged 0.1% over the past month. This positive trend indicates that analysts are increasingly optimistic about BioMarin’s future growth prospects, which is a strong indication of its potential to deliver solid returns.
Conclusion
BioMarin Pharmaceutical (BMRN) has not only earned a Growth Score of B based on a number of factors, including the ones discussed above, but it also carries a Zacks Rank #1 because of the positive earnings estimate revisions. This combination indicates that BioMarin is a potential outperformer and a solid choice for growth investors.
Therefore, investors should consider adding BioMarin to their portfolio, as its strong growth prospects, impressive earnings growth rate, cash flow growth rate, and positive earnings estimate revisions make it an attractive investment opportunity.
About the Zacks Growth Style Score
The Zacks Growth Style Score is part of the Zacks Style Scores system, which looks beyond traditional growth attributes to analyze a company’s real growth prospects. The score combines several key metrics, including EPS growth, revenue growth, and cash flow growth, to give investors an idea of a stock’s true growth potential.
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