Is Northern Trust (NTRS) a Strong Growth Stock?

Growth stocks attract many investors for their potential to deliver above-average financial growth, often resulting in impressive market returns. However, identifying a truly great growth stock can be quite challenging.

Inherently, these stocks come with higher volatility and risk, and sometimes the growth narrative may be nearing its conclusion, leading to potential losses.

Fortunately, the Zacks Growth Style Score, which delves deeper into a company’s genuine growth potential beyond standard growth metrics, can assist in identifying promising growth stocks.

Currently, Northern Trust Corporation (NTRS) stands out as one such candidate. The company not only boasts an appealing Growth Score but also enjoys a strong position in the Zacks ranking system.

Research indicates that stocks demonstrating excellent growth criteria consistently surpass market performance. Stocks that possess either an A or B Growth Score and a Zacks Rank of #1 (Strong Buy) or #2 (Buy) tend to achieve even higher returns.

Here are three compelling reasons why Northern Trust could be viewed as a solid growth investment right now.

Earnings Growth

Earnings growth is a critical indicator for investors, as companies with rapidly increasing profits usually draw significant attention. For growth-oriented investors, a double-digit earnings growth rate is particularly appealing, suggesting robust future prospects and enhancing stock price expectations.

While Northern Trust has a historical earnings per share (EPS) growth rate of 1.2%, it’s essential to focus on future projections. Analysts predict the company's EPS will grow by 16.5% this year, significantly outperforming the industry average of just 1.4%.

Strong Asset Utilization Ratio

The asset utilization ratio, or sales-to-total-assets (S/TA) ratio, is frequently overlooked but is crucial for assessing growth potential. This metric reveals how effectively a company is utilizing its assets to generate sales.

Northern Trust currently holds an S/TA ratio of 0.1, signifying $0.1 in sales generated for every dollar in assets. This is notably higher than the industry average of 0.06, indicating superior efficiency.

In addition to efficient asset usage, sales growth is equally significant. Northern Trust anticipates a sales increase of 20.7% this year, contrasting sharply with the industry average, which forecasts a decline of -1.3%.

Promising Earnings Estimate Revisions

Investors should also observe trends in earnings estimate revisions. A positive trend often signals potential stock price increases. Historical data demonstrates a strong connection between earnings estimate revisions and short-term stock performance.

Recent evaluations show a positive shift for Northern Trust, with current-year earnings estimates rising. The Zacks Consensus Estimate for the current year has increased by 4% in the last month.

Conclusion

Although Northern Trust is currently classified as a Zacks Rank #2 stock due to notable positive earnings estimate revisions, it also holds a Growth Score of B based on several metrics discussed.

This combination of strong projections and growth indicators marks Northern Trust as a promising opportunity for investors focused on growth stocks.

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