4 Growth Stocks That Could Produce Monster Earnings
Current market volatility notwithstanding, we believe quality growth stocks with the potential to generate solid earnings, such as HCA Healthcare (HCA), Companhia Siderurgica (SID), Korn Ferry (KFY), and Matson Inc....
Current market volatility notwithstanding, we believe quality growth stocks with the potential to generate solid earnings, such as HCA Healthcare (HCA), Companhia Siderurgica (SID), Korn Ferry (KFY), and Matson Inc. (MATX), could be great bets now. So, let’s examine these names.
Following a disappointing August, the U.S. economy added just 194,000 jobs in September, versus a 500,000 projection by Dow Jones, which has fostered pessimism among some investors. This, along with several lingering issues, could keep the market under pressure in the near term.
The stock market continues to exhibit extreme volatility, as evidenced by the CBOE Volatility Index’s (VIX) significant increase over the past three months, due to inflation concerns and doubts about the economic recovery. Growth stocks are usually ideal for dodging short-term market fluctuations, however. And the government’s continuing fiscal and monetary support to the economy, along with the potential that the forthcoming third-quarter earnings season will be encouraging, could further boost returns of growth stocks poised to deliver solid earnings.
Therefore, we think it could be wise to bet on HCA Healthcare Inc. (HCA), Companhia Siderurgica Nacional (SID), Korn Ferry (KFY), and Matson Inc. (MATX) because they possess solid growth attributes and are well-positioned to deliver solid earnings.
HCA Healthcare Inc. (HCA)
Nashville, Tenn.-based HCA operates as a health care services company. As of December 31, 2020, it operated 185 hospitals, including 178 general acute care hospitals, five mental hospitals, two rehabilitation hospitals; 121 freestanding surgical centers; and 21 freestanding endoscopy facilities in 20 states and in the U.K.
Last month, HCA agreed to acquire the operations of Steward Health Care’s five Utah hospitals. The addition of these facilities should allow the company to expand its healthcare network and invest in services to meet an increasing demand for healthcare.
During the second quarter, ended June 30, 2021, HCA’s revenue increased 30.4% year-over-year to $14.44 billion. Its net income surged 34.3% year-over-year to $1.45 billion over this period. The company’s EPS increased 38% from its year-ago value to $4.36. And its revenue and EBITDA have grown at CAGRs of 7.41% and 12.8%, respectively, over the past three years.
A $16.82 consensus EPS estimate for the current year indicates a 44.9% improvement year-over-year. Analysts expect HCA's revenue to increase 11.7% year-over-year to $57.56 billion in its fiscal year 2021.
HCA's POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
HCA is also rated A for Growth and Sentiment, and a B for Stability. Within the A-rated Medical – Hospitals industry, it is ranked #1 of 11 stocks.
To see additional POWR Ratings for Momentum, Value, and Quality for HCA, click here.
Companhia Siderurgica Nacional (SID)
SID is an integrated steel producer in Brazil and Latin America. Steel; Mining; Logistics; Energy; and Cement are the five operational segments of the São Paulo, Brazil-based company. SID explores primarily for iron ore reserves at the Casa de Pedra and Engenho mines in Congonhas, as well as limestone and dolomite at the Bocaina mine in Arcos, Minas Gerais, Brazil.
During the second quarter, ended June 30, 2021, SID’s net sales revenue increased 147.4% year-over-year to R$15.39 billion ($2.79 billion). Its gross profit increased 349.4% year-over-year to R$8.28 billion ($1.50 billion), while its net income grew significantly from the prior-year quarter to R$5.51 billion ($1 billion). Its revenue has increased at a 23.8% CAGR over the past five years, and its levered free cash flow has increased at a 110% annualized rate over the past three years.
The company's EPS is expected to grow 382.4% year-over-year to $2.46 in the current year. In addition, analysts expect SID's revenue to increase 85.3% year-over-year to $10.24 billion in its fiscal year 2021.
SID’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has an A grade for Momentum and Quality, and a B for Value. In the A-rated Steel industry, it is ranked #11 of 33 stocks.
In total, we rate SID on eight distinct levels. Beyond what we've stated above, we have also given SID grades for Growth, Stability, and Sentiment. Get all the SID ratings here.
Korn Ferry (KFY)
Los Angeles-based KFY provides organizational consulting services worldwide. The company operates through four segments: Consulting; Digital; Executive Search; and RPO (Recruitment Process Outsourcing) & Professional Search. In addition, the company provides an artificial intelligence machine-learning platform that identifies the structures, roles, skills, and behaviors required to create insight and make recommendations. It caters to government and non-profit groups, public and private enterprises, as well as medium-market and rising growth firms.
In June, KFY and the National Association of Investment Companies (NAIC), the world's largest network of diversely owned private equity and hedge fund firms, formed an exclusive partnership to work on a series of transformational initiatives to improve diverse talent distribution and build more inclusive organizations in the alternative investment industry.
For its first fiscal quarter, ended July 31, 2021, KFY’s revenue increased 69.6% year-over-year to $588.09 million. Its operating income came in at $101.26, versus a $43.79 million operating loss in the prior-year quarter. The company reported a $74.82 million net income, compared to a net loss of $30.83 million in the first quarter of 2020. Its EPS amounted to $1.37, versus a $0.58 loss per share in the same period last year. Its net income and EBITDA have increased at CAGRs of 49.3% and 10%, respectively, over the past three years.
Analysts expect KFY’s revenue to increase 30.3% year-over-year to $2.36 billion in its fiscal year 2021. In addition, the company's EPS is expected to grow 98.4% in the current year.
KFY's POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. KFY is also rated an A grade for Growth and Sentiment. Within the A-rated Outsourcing – Staffing Services industry, it is ranked #4 of 19 stocks.
Click here to see additional POWR Ratings for Stability, Momentum, Value, and Quality for KFY.
Matson Inc. (MATX)
MATX provides maritime transportation and logistics services through its subsidiaries. The company offers its services to the U.S. military, freight forwarders, retailers, consumer goods, automobile manufacturers, and others. Ocean Transportation and Logistics are the company’s two business segments. MATX is headquartered in Honolulu, Hawaii.
For the second quarter, ended June 30, 2021, MATX’s operating revenue increased 66.9% year-over-year to $874.9 million. Its operating profit grew 317.8% from its year-ago value to $213.9 million. The company's net income increased 395.4% year-over-year to $162.5 million. In addition, its EPS increased 388.2% year-over-year to $3.71 over this period. Its revenue and EBIT have increased at CAGRs of 11.3% and 60.1%, respectively, over the past three years.
Analysts expect MATX's revenue to increase 41.8% year-over-year to $3.38 billion in its fiscal year 2021. The company's EPS is expected to grow 202.5% year-over-year to $13.43 in the current year.
It is no surprise that MATX has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has a B grade for Growth, Value, and Momentum. In the Shipping industry, it is ranked #2 of 48 stocks.
In addition to the POWR Ratings grades I have just highlighted, one can see the MATX ratings for Stability, Sentiment, and Quality here.
HCA shares were trading at $242.62 per share on Thursday morning, up $3.61 (+1.51%). Year-to-date, HCA has gained 48.52%, versus a 18.52% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
The post 4 Growth Stocks That Could Produce Monster Earnings appeared first on StockNews.com