Looking for a Growth Stock? 3 Reasons Why Clean Harbors (CLH) is a Solid Choice

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. But finding a growth stock that can live up to its true potential can be a tough task.

That's because, these stocks usually carry above-average risk and volatility. In fact, betting on a stock for which the growth story is actually over or nearing its end could lead to significant loss.

However, 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, makes it pretty easy to find cutting-edge growth stocks.

Clean Harbors (CLH) 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.

Research shows that stocks carrying the best growth features consistently beat 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 environmental services company a great growth pick right now.

Earnings Growth

Arguably nothing is more important than earnings growth, as surging profit levels is what most investors are after. 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 Clean Harbors is 86.4%, investors should actually focus on the projected growth. The company's EPS is expected to grow 26.2% this year, crushing the industry average, which calls for EPS growth of 15%.

Impressive Asset Utilization Ratio

Growth investors often overlook asset utilization ratio, also known as sales-to-total-assets (S/TA) ratio, but it is an important feature of a real growth stock. This metric shows how efficiently a firm is utilizing its assets to generate sales.

Right now, Clean Harbors has an S/TA ratio of 0.83, which means that the company gets $0.83 in sales for each dollar in assets. Comparing this to the industry average of 0.52, it can be said that the company is more efficient.

In addition to efficiency in generating sales, sales growth plays an important role. And Clean Harbors looks attractive from a sales growth perspective as well. The company's sales are expected to grow 23.1% this year versus the industry average of 14.9%.

Promising Earnings Estimate Revisions

Beyond the metrics outlined above, investors should consider the trend in earnings estimate revisions. A positive trend is a plus here. Empirical research shows that there is a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

There have been upward revisions in current-year earnings estimates for Clean Harbors. The Zacks Consensus Estimate for the current year has surged 7.9% over the past month.

Bottom Line

While the overall earnings estimate revisions have made Clean Harbors a Zacks Rank #2 stock, it has earned itself a Growth Score of B based on a number of factors, including the ones discussed above.

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

This combination positions Clean Harbors well for outperformance, so growth investors may want to bet on it.

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