Looking for a Growth Stock? 3 Reasons Why Harmony Biosciences is a Solid Choice

Growth stocks are attractive to many investors, as above-average financial growth helps these stocks easily grab the market's attention and produce exceptional 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, 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.

Harmony Biosciences Holdings, Inc. HRMY 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.

Studies have shown that stocks with the best growth features consistently outperform 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).

While there are numerous reasons why the stock of this company is a great growth pick right now, we have highlighted three of the most important factors below:

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 Harmony Biosciences is 33.7%, investors should actually focus on the projected growth. The company's EPS is expected to grow 41.8% this year, crushing the industry average, which calls for EPS growth of 15.7%.

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, Harmony Biosciences has an S/TA ratio of 0.77, which means that the company gets $0.77 in sales for each dollar in assets. Comparing this to the industry average of 0.21, it can be said that the company is more efficient.

In addition to efficiency in generating sales, sales growth plays an important role. And Harmony Biosciences is well positioned from a sales growth perspective too. The company's sales are expected to grow 22.3% this year versus the industry average of 1.3%.

Promising Earnings Estimate Revisions

Superiority of a stock in terms of the metrics outlined above can be further validated by looking at the trend in earnings estimate revisions. A positive trend is of course favorable 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 Harmony Biosciences. The Zacks Consensus Estimate for the current year has surged 0.5% over the past month.

Bottom Line

While the overall earnings estimate revisions have made Harmony Biosciences a Zacks Rank #1 stock, it has earned itself a Growth Score of B based on a number of factors, including the ones discussed above.

This combination indicates that Harmony Biosciences is a potential outperformer and a solid choice for growth investors.

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