3 Top Growth Stocks to Buy in the Fourth Quarter
While the current, historically high inflation rate is of significant concern to the stock market, a surge in discretionary spending, decline in jobless claims, and estimated strong GDP growth in...
While the current, historically high inflation rate is of significant concern to the stock market, a surge in discretionary spending, decline in jobless claims, and estimated strong GDP growth in the fourth quarter should support the performances of the benchmark indexes. Therefore, we think the shares of Sysco (SYY), Robert Half (RHI), and RCI Hospitality (RICK), which possess solid growth attributes, could be ideal bets now. Let’s discuss.
All three major U.S. stock market indices closed slightly higher yesterday. And CNBC’s Jim Cramer said that the investors should remain confident in the face of market weakness due to inflation concerns. Also, according to a FactSet report issued on November 5, 2021, analysts project earnings growth of more than 20% in Q4 2021.
Furthermore, the decline in weekly jobless claims to 267,000, an increase in discretionary spending, and the passage of a jumbo infrastructure bill by the U.S. House of Representatives last week have raised investors’ confidence. Therefore, we think it could be wise to bet on fundamentally sound growth stocks now. Investors’ interest in growth stocks is evidenced by the SPDR Portfolio S&P 500 Growth ETF’s (SPYG) 33.7% gains over the past year.
Given this backdrop, Sysco Corporation (SYY), Robert Half International Inc. (RHI), and RCI Hospitality Holdings, Inc. (RICK), which possess solid growth attributes, could be ideal bets now. Analysts expect their earnings could increase significantly in the current quarter and over the next few years.
Sysco Corporation (SYY)
SYY is a global seller, marketer, and distributor of food and non-food products to restaurants, healthcare, educational facilities, lodging establishments, and other customers. The Houston, Tex.-based company offers frozen foods, meats, seafood, fruits, vegetables, canned and dry foods, dairy products, and beverage products. SYY operates in three segments, including U.S. Foodservice; International Foodservice; SYGMA, and others.
Last month, SYY acquired Paragon Foods, a Pennsylvania-based broadline processor and distributor. The acquisition will operate as a part of FreshPoint, SYY’s specialty produce company. With this acquisition, SYY should be able to strengthen its position in the foodservice industry.
SYY’s sales increased 39.7% year-over-year to $16.46 billion for its fiscal first quarter, ended October 2, 2021. The company’s gross profit grew 33.9% from its year-ago value to $2.97 billion. Its operating income rose 87.9% from its year-ago value to $685.1 million. Also, its net earnings increased 147.9% year-over-year to $429.9 million.
SYY’s revenue is expected to increase 26.3% year-over-year to $64.8 billion in its fiscal year 2022. Also, its EPS is expected to grow 323.5% in the current quarter and 263.6% in the next quarter. SYY’s EPS is expected to grow at 54.2% rate per annum over the next five years. Furthermore, its revenue has increased at a 1.6% CAGR over the past five years, and its total assets have increased at a 6% CAGR over the past three years. The stock has gained 13.3% in price over the past year.
SYY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has a B for Growth and Quality. We have also graded SYY for Stability, Sentiment, Momentum, and Value. Click here to access all SYY’s ratings. SYY is ranked #9 of 81 stocks in the Food Makers industry.
Robert Half International Inc. (RHI)
RHI provides staffing and risk consulting services as well as accounting, finance, and bookkeeping services. The Menlo Park, Calif., company operates through three segments: Temporary and Consultant Staffing; Permanent Placement Staffing and Risk Consulting; and Internal Audit Services. RHI delivers its services through Robert Half Finance & Accounting, OfficeTeam, Robert Half Technology, Robert Half Management Resources, Robert Half Legal, The Creative Group, and Protiviti divisions.
RHI’s service revenues increased 43.9% year-over-year to $1.71 billion for the third quarter, ended September 30, 2021. The company’s gross margin grew 55.2% from its year-ago value to $725.33 million. Its net income rose 125.6% from the prior-year quarter to $170.87 million. Also, the company’s EPS increased 128.4% year-over-year to $1.53.
Analysts expect RHI’s revenue to increase 25.2% year-over-year to $6.39 billion in its fiscal 2021.The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Its EPS is expected to increase 72.6% in the current quarter and 34.7% in the next quarter. Also, RHI's EPS is expected to grow at 31% per annum over the next five years. RHI’s EPS and net income have increased at CAGRs of 15.9% and 12.6%, respectively, over the past three years. The stock has surged 61% in price over the past nine months and 86.7% over the past year.
It is no surprise that RHI has an overall A rating, which equates to a Strong Buy in our POWR Rating system. Also, the stock has an A grade for Quality.
RCI Hospitality Holdings, Inc. (RICK)
Houston, Tex.-based RICK, with its subsidiaries, owns and operates hospitality, gentlemen’s clubs, and sports bars and restaurants. The company operates through Nightclubs; Bombshells; and other segments. RICK delivers services under Rick’s Cabaret, Scarlett’s Cabaret, Vivid Cabaret, Tootsie's Cabaret, Club Onyx, Jaguars Club, XTC Cabaret, and Bombshells brands.
This month, RICK closed the acquisition of The Mansion Gentlemen's Club and Steakhouse of Newburgh, N.Y., and its real estate. With this acquisition, RICK is expected to expand its presence in New York.
For its fiscal third quarter, ended June 30, 2021, RICK’s total revenues increased 293% year-over-year to $57.86 million. The company’s operating income came in at $18.51 million, compared to a $4.66 million operating loss in the prior-year quarter. Its net income amounted to $12.32 million, versus a $5.57 million net loss in the year-ago value. Also, the company’s EPS came in at $1.37, compared to a $0.6 loss per share in the fiscal third quarter of 2020.
RICK’s revenue is expected to increase 47.9% year-over-year to $195.75 million in its fiscal year 2021. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. The company’s EPS is expected to increase 346.7% in the current quarter and 171.8% in the next quarter. Also, RICK's EPS is expected to grow at a 40% rate per annum over the next five years.
In addition, its revenue has increased at a 4.7% CAGR over the past five years, and its total assets have increased at a 4.7% CAGR over the past three years. The stock has gained 26.1% in price over the past nine months and 161.1% over the past year.
RICK’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. Also, the stock has a B for Quality, Sentiment, and Growth.
In addition to the POWR Rating grades I have just highlighted, one can see RICK’s ratings for Value, Stability, and Momentum here. The stock is ranked #1 of 43 stocks in the B-rated Restaurants industry.
SYY shares were trading at $77.82 per share on Friday morning, up $0.25 (+0.32%). Year-to-date, SYY has gained 7.28%, versus a 25.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.
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