As the world strives for a sustainable future, ESG initiatives are enabling companies to address evolving environmental and social challenges while enhancing long-term competitiveness. Emerging technologies like AI and blockchain are transforming ESG reporting, boosting transparency and efficiency, and attracting sustainable investors.

Hence, investing in ESG-focused stocks such as Adobe Inc. (ADBE), NextEra Energy, Inc. (NEE), and Cadence Design Systems, Inc. (CDNS) aligns with this vision of building a sustainable future.

Global ESG assets are on track to hit $40 trillion by 2030, accounting for over 25% of total global assets under management, according to Bloomberg. Despite ongoing challenges, 85% of surveyed investors believe ESG strategies boost returns and portfolio resilience. Rapid ESG asset growth in regions like Japan, Canada, and Australia is fueled by supportive policies and favorable economic conditions.

Meanwhile, despite some backlash in regions like the U.S., global commitment to ESG principles remains strong, driving robust demand. Increasing activism around sustainability is pushing companies to align their strategies with ESG goals, creating valuable opportunities for investors. The global ESG investing market is projected to reach $79.71 billion by 2030, growing at an impressive CAGR of 19.7%.

Plus, heightened scrutiny and stricter regulations are enhancing market maturity and credibility, mitigating risks like greenwashing. Greater global alignment in ESG regulations further supports the market’s long-term sustainability, presenting a promising investment opportunity. With these favorable trends in mind, let’s delve into the fundamental aspects of three top ESG-focused stocks.

Adobe Inc. (ADBE)

ADBE provides professionals, communicators, businesses, and consumers with a range of products and services to create, manage, deliver, measure, optimize, engage, and transact with content and experiences across diverse digital media formats. Its segments include Digital Media; Digital Experience; and Publishing and Advertising.

On December 10, 2024, ADBE announced its partnership with Box, making Adobe Express the default image editor for Box users, enabling seamless content creation and editing within Box’s secure platform. The integration includes Firefly AI-powered features and plans for future AI and video editing enhancements.

On December 3, 2024, ADBE announced an expanded partnership with AWS to make Adobe Experience Platform (AEP) available on AWS, enabling brands to deliver highly personalized customer experiences using AI-driven insights. The integration provides real-time customer data, journey optimization, and analytics for seamless engagement across channels.

In terms of the trailing-12-month Return on Common Equity margin, ADBE’s 36.31% is 730.4% higher than the 4.37% industry average. Similarly, its 36.98% trailing-12-month levered FCF margin is 217.4% higher than the 11.65% industry average. Additionally, its 25.85% trailing-12-month net income margin is 573.1% higher than the 3.84% industry average.

For the fourth quarter that ended November 29, 2024, ADBE’s total revenue increased 11.1% year-over-year to $5.61 billion. During the same period, its non-GAAP operating income grew 10.8% from the previous year to $2.60 billion. Additionally, its non-GAAP net income and non-GAAP EPS were $2.13 billion and $4.81, respectively, representing increases of 8.8% and 12.6% year-over-year.

Analysts expect ADBE’s EPS and revenue for the quarter ending February 28, 2025, to increase 11% and 9.3% year-over-year to $4.97 and $5.66 billion, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past month, the stock has declined 2.4% to close the last trading session at $436.36.

ADBE’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has an A grade for Quality and a B for Growth. It is ranked #15 out of 124 stocks in the B-rated Software – Application industry. Beyond what we stated above, we also have given ADBE grades for Value, Momentum, Stability, and Sentiment. Get all the ADBE ratings here.

NextEra Energy, Inc. (NEE)

NEE and its subsidiaries generate, transmit, distribute, and sell electric power to retail and wholesale customers. The company generates electricity through wind, solar, nuclear, natural gas, and other clean energy sources.

In terms of the trailing-12-month gross profit margin, NEE’s 62.11% is 38.5% higher than the 44.84% industry average. Likewise, its 33.22% trailing-12-month EBIT margin is 57% higher than the industry average of 21.15%. Also, its 100.25% trailing-12-month Capex / Sales is 195.6% higher than the industry average of 33.92%.

During the nine months ended September 30, 2024, NEE’s operating revenues were $19.37 billion, and its operating income was $6.54 billion. The company’s adjusted earnings grew 11% year-over-year to $5.97 billion. Likewise, its adjusted earnings per share reached $2.90, up 9% from the prior-year value.

Street expects NEE’s EPS for the quarter ended December 31, 2024, to increase marginally year-over-year to $0.52. Its revenue for the same quarter is expected to rise 15.9% year-over-year to $7.97 billion. NEE surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 23.7% to close the last trading session at $70.85.

NEE’s POWR Ratings reflect strong prospects. It is ranked #40 out of 58 stocks in the Utilities – Domestic industry. It has a B grade for Momentum. Click here to see NEE’s ratings for Growth, Value, Stability, Sentiment, and Quality.

Cadence Design Systems, Inc. (CDNS)

CDNS provides software, hardware, services, and reusable integrated circuit (IC) design blocks worldwide. The company offers functional verification services, including emulation and prototyping hardware. Its functional verification offerings consist of JasperGold, Xcelium, Palladium, and Protium.

In terms of the trailing-12-month Return on Total Capital, CDNS’ 14.23% is 374.9% higher than the 3% industry average. Its 23.87% trailing-12-month net income margin is 521.3% higher than the 3.84% industry average. Furthermore, the stock’s 33.31% trailing-12-month EBITDA margin is 219.5% higher than the 10.43% industry average.

CDNS’s total revenue in the fourth quarter ended December 31, 2023, grew 18.8% year-over-year to $1.22 billion. The company’s income from operations rose 19.5% from the year-ago quarter to $350.06 million. Moreover, its net income was $238.11 million, or $0.87 per share.

For the quarter that ended December 31, 2024, CDNS’ EPS and revenue are expected to increase 32.1% and 26% year-over-year to $1.82 and $1.35 billion, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past six months, the stock has gained 11.1% to close the last trading session at $310.97.

CDNS’ bright prospects are reflected in its POWR Ratings. CDNS has an A grade for Quality and a B for Sentiment. Within the Software – Application industry, it is ranked #50. To see CDNS’ ratings for Growth, Value, Momentum, and Stability, click here.

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ADBE shares were trading at $438.48 per share on Wednesday afternoon, up $2.12 (+0.49%). Year-to-date, ADBE has declined -1.39%, versus a 3.62% rise in the benchmark S&P 500 index during the same period.

About the Author: Abhishek Bhuyan

Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments. More...

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