Seeking Big Gains? 3 Key Traits of Outperforming Stocks

Investors are always looking for stocks that deliver robust gains, trying to squeeze the most out of their buck. Of course, finding big-time winners is much easier said than done, but investors can still deploy a basic framework that puts them on the path to reaping outsized gains.

But what drives market outperformance?

Let’s take a closer look at a few common traits among companies delivering outsized gains.

Sales Growth Remains Key

Sales growth is vital, as it’s the foundation of generating profits. Strong revenue generation allows companies to achieve scaling efficiencies, generate continuous shareholder value, and many other clear benefits.

A clear-cut example of this has been Nvidia over the last several years, whose shares have soared on the back of rock-solid sales growth within its Data Center.

Margins Are Critical

Margin performance reveals how efficiently a company operates, showing whether it’s extracting more profit from each dollar of sales. Expansion indicates that a company is operating more efficiently, with better cost controls and other operational processes driving improved financial health.

Innovation Keeps You Ahead of the Competition

Innovation is crucial for a company to stay relevant, helping it maintain and expand its current market share. Nvidia is again a clear-cut example of this favorable development, whose innovation within artificial intelligence (AI) has launched shares and put it at the forefront of market headlines.

Earnings Estimates Drive Near-Term Performance

Favorable earnings estimate revisions are key for a stock to move higher, precisely where the Zacks Rank comes into play.

The Zacks Rank uses four factors related to earnings estimates to classify stocks into five groups, ranging from ‘Strong Buy’ to ‘Strong Sell.’ Importantly, it allows individual investors to take advantage of trends in earnings estimate revisions and benefit from the power of institutional investors.

The Zacks Rank can be seen in action below, capturing the bulk of the recent charge higher we’ve seen within SanDisk SNDK.

Image Source: Zacks Investment Research

Bottom Line

All investors look to reap outsized gains.

When it comes to outperformance, several factors, including robust sales growth, margin expansion, innovation, and favorable earnings estimate revisions, are all contributing factors.

5 Stocks Set to Double

Each was handpicked by a Zacks expert as the favorite stock to gain +100% or more in the months ahead. They include

Stock #1: A Disruptive Force with Notable Growth and Resilience

Stock #2: Bullish Signs Signaling to Buy the Dip

Stock #3: One of the Most Compelling Investments in the Market

Stock #4: Leader In a Red-Hot Industry Poised for Growth

Stock #5: Modern Omni-Channel Platform Coiled to Spring

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor. While not all picks can be winners, previous recommendations have soared +171%, +209% and +232%.

See Our Newest 5 Stocks Set to Double Picks >>

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Sandisk Corporation (SNDK): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research