Among leading growth stocks, today's IBD 50 Stocks To Watch pick is metal and steel manufacturer Commercial Metals, as shares near a new buy point.
The leading metals play has been working on a cup base with 38.82 entry since early January, according to MarketSmith. Shares pulled back alongside the market last month but were quick to reclaim the 50-day line and have floated above this level since.
Recently, the market has been favoring stocks like Commercial Metals, which maintains a low price-to-earnings ratio of 8, well below the S&P 500's P-E ratio. The Irving, Texas-based steelmaker also offers investors growth, with its double-digit and triple-digit year-over-year EPS and sales growth in recent quarters. Fourth-quarter earnings were released on Jan. 10, and showed Commercial Metals topping estimates.
The stock dipped on Wednesday, down around 0.3%, but is holding on to a net weekly gain of over 2%. Currently, shares sit 5% below the proper buy point. The relative strength line shows positive action in recent weeks as it notches a new high.
Growth Stocks To Watch
Commercial Metals managed to grow revenue and earnings at an impressive rate in the two most recent quarters. Year-over-year earnings growth came in at 59% and 179% in those quarters, respectively. Sales rose 44% and 42%.
CMC is a leader in the metal fabrication industry group, which ranks No. 67 of the 197 groups IBD measures. The stock, with its 98 Composite Rating, ranks highest in the group by that metric.
The steelmaker's November-quarter earnings highlighted "a growing construction backlog in North America, as well as broad strength across key end markets in both North America and Europe."
Additionally, the company noted increased margins for steel products in North America, as well as with other products such as rebar and other raw materials. The firm's European results also benefited from increased margin over scrap costs.
Commercial Metals highlighted several indicators in its earnings statement that point to continued strength. Most importantly, the company noted that its downstream bid volumes, a key indicator of the construction project pipeline, increased meaningfully from a year ago, while new contract awards and backlog also experienced growth.
The firm also announced on Jan. 10 its plan to construct another state-of-the-art micro mill, as part of the next phase of its long-term growth strategy. The new mill will be situated to primarily serve the Northeast, mid-Atlantic, and Mid-Western U.S. markets.
"This is an exciting new investment for CMC and our customers. The new micro mill will fortify our position in the large construction markets within the region and optimize CMC's existing Eastern U.S. operational footprint through enhanced production flexibility, improved service capabilities, and logistical efficiencies," CEO Barbara R. Smith said in a statement.
