Hamilton Lane (HLNE) is an Incredible Growth Stock: 3 Reasons Why

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.

Hamilton Lane (HLNE) 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 returns are even better for stocks that possess the combination of a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Here are three of the most important factors that make the stock of this private-market investment firm a great growth pick right now.

Earnings Growth

Earnings growth is arguably the most important factor, as stocks exhibiting exceptionally surging profit levels tend to attract the attention of most investors. And for growth investors, double-digit earnings growth is definitely preferable, and often an indication of strong prospects (and stock price gains) for the company under consideration.

While the historical EPS growth rate for Hamilton Lane is 8.7%, investors should actually focus on the projected growth. The company's EPS is expected to grow 9% this year, crushing the industry average, which calls for EPS growth of 6%.

Impressive Asset Utilization Ratio

Asset utilization ratio -- also known as sales-to-total-assets (S/TA) ratio -- is often overlooked by investors, but it is an important indicator in growth investing. This metric shows how efficiently a firm is utilizing its assets to generate sales.

Right now, Hamilton Lane has an S/TA ratio of 0.37, which means that the company gets $0.37 in sales for each dollar in assets. Comparing this to the industry average of 0.24, it can be said that the company is more efficient.

While the level of efficiency in generating sales matters a lot, so does the sales growth of a company. And Hamilton Lane looks attractive from a sales growth perspective as well. The company's sales are expected to grow 18.6% this year versus the industry average of 4.5%.

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.

The current-year earnings estimates for Hamilton Lane have been revising upward. The Zacks Consensus Estimate for the current year has surged 1.5% over the past month.

Bottom Line

While the overall earnings estimate revisions have made Hamilton Lane a Zacks Rank #2 stock, it has earned itself a Growth Score of A 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 Hamilton Lane well for outperformance, so growth investors may want to bet on it.

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

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