The recent stock market momentum reflects rising confidence in an economic recovery this year. And an aggressive stance by Congressional Democrats regarding the expected passage of President Biden’s $1.9 trillion stimulus package has added to the rally. The proposed new relief package comes at a critical time when a winter resurgence of COVID-19 is slowing the labor-market recovery.
The bullish run should be further supported by the Fed’s pledge to keep interest rates at their current near-zero level until the economy returns to health These factors are leading some investors to rotate away from pricey growth stocks into quality bargains that hold the potential to gallop with an economic recovery. However, because some pandemic-driven trends are not expected to reverse anytime soon, growth stocks that flourished amid the pandemic based on the pandemic’s effects should continue to perform well.
So, we think investing in stocks that possess sound fundamentals and favorable revenue and earnings outlooks could be rewarding. Dropbox, Inc. (DBX), RPM International Inc. (RPM) and Cirrus Logic, Inc. (CRUS) have defied the economic slump to report impressive results amid the pandemic and likely still have plenty of upside.
Dropbox, Inc. (DBX)
Based in San Francisco, CA, DBX provides cloud storage solutions and file sharing services to more than 600 million registered users across 180 countries. Its ancillary features include Dropbox paper, Dropbox showcase and Dropbox smart sync, which allow users to create, access, organize, share, collaborate, and secure content.
Last December, DBX was positioned by Aragon Research, Inc. in the Leader section of its Globe for Digital Work Hubs, 2021. The company has been included on this list for the last two years, demonstrating its broadening market reach in the remote working ecosystem.
In November, DBX unveiled an upgraded version of its collaborative workspace, Dropbox Spaces, that help teams organize, collaborate, and work securely on a single platform. The company also added several new workflow features, new enterprise features and certification features to ensure an integrated remote work environment.
DBX’s revenues have increased at a CAGR of 21.3% over the past three years, while its total assets rose at a CAGR of 42.6% over the same period. The company’s impressive track record positions it well to emerge as a leading player in the cloud industry.
DBX’s revenues have increased 14% year-over-year to $487.40 million in the third quarter ended September 30, 2020. Its paid user base has grown 8.9% from the year-ago value to 15.25 million, while its average revenue per paying user increased 4% over the same period to $128.03. DBX’s net income has increased 292.4% from the prior-year quarter to $32.70 million, yielding an EPS of $0.08, up 300% over the three-month period.
Analysts expect DBX’s revenues to increase 11.8% year-over-year in the about-to-be reported quarter ended December 31, 2020. A consensus EPS estimate of $0.24 for the fourth quarter represents a 50% improvement from the year-ago value. The company has an impressive earnings surprise history; it beat consensus Street estimates in each of the trailing four quarters. The stock has gained 41.1% over the past year.
DBX’s strong fundamentals are reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
The stock has an overall rating of A, which equates to Strong Buy in our proprietary rating system. DBX has a grade of B for both Growth, Value, and Momentum, and an A for Quality. In the 81-stock Technology – Services Industry, it is ranked #4.
In total, we rate DBX on eight different levels. Beyond what we stated above, we also have given DBX grades for Stability, Industry and Sentiment. Get all DBX’s ratings here.
RPM International Inc. (RPM)
RPM manufactures and markets high-performance coatings, sealants and specialty chemicals, primarily for maintenance and improvement applications. The Company operates across four segments: Consumer Group, Construction Products Group, Performance Coatings Group and Specialty Products Group. It serves industrial, specialty, and consumer markets worldwide.
RPM’s revenue has increased at a CAGR of 3.4% over the past three years, while its EBITDA rose at a CAGR of 7.3% over the same period.
RPM’s net sales have increased 6% year-over-year to $1.49 billion in the fiscal second quarter ended November 30, 2020. Its organic sales grew 3.5% during the quarter and acquisitions, including the recent addition of Ali Industries, contributed 2.3%, which positively impacted both sales and earnings while also demonstrating RPM’s renewed focus on growth. Its adjusted EBIT has risen 29.7% from the year-ago value to $199.25 million, while its EPS improved 63.3% to $0.98.
Analysts expect RPM’s revenues to increase 4.8% year-over-year to $1.23 billion in the current quarter ending February 28, 2020. A consensus EPS estimate of $0.35 for the third quarter represents a 52.2% improvement from the year-ago value. The company has an impressive earnings surprise history; it beat consensus Street estimates in each of the trailing four quarters. The stock has gained 13.4 % over the past year.
It is no surprise that RPM has an overall rating of A, which equates to Strong Buy in our POWR Ratings system. RPM has a grade of B for Value, Quality and Stability and an A for Growth. In the A-rated, 94-stock Chemicals Industry, it is ranked #2.
Click here to see the additional POWR Ratings for RPM (Momentum and Sentiment).
Cirrus Logic, Inc. (CRUS)
CRUS is a leader in low-power, high-precision mixed-signal processing solutions that create innovative user experiences for mobile and consumer applications. The company’s products find application in the audio and energy industries. Its product pipeline can be categorized into three segments–Portable Audio, Non-Portable and Other.
The company has been taking active steps to boost its business this year, thereby preparing it to become more competitive in a post-pandemic world. To this end, CRUS increased its focus on developing a roadmap of innovative products that will enable it to capitalize on growing demand for audio and high-performance mixed-signal solutions.
The company has also undertaken several changes at the executive and director level. It appointed John Forsyth as its new president last month. Forsyth has over 20 years of experience in this domain.
CRUS’ EPS has increased at a CAGR of 6.7% over the past three years, while its total assets have risen at a CAGR of 6.9% over the same period, which exhibits the company’s impressive growth potential.
CRUS net sales have increased 29.7% year-over-year to $485.80 million in the fiscal third quarter ended December 26, 2020, due to strong demand for its products for recently introduced smartphones. Its non-GAAP operating income has increased 54.2% from the year-ago value to $145.94 million, while its non-GAAP net income has increased 49.3% to $127.76 million over the same period, yielding a non-GAAP EPS of $2.13.
Analysts expect CRUS’ revenues to increase 8.3% year-over-year to $302.47 million in the current quarter ending March 31, 2020. A consensus EPS estimate of $0.71 for the fourth quarter represents a 4.4% improvement from the year-ago value. The company has an impressive earnings surprise history; it beat consensus Street estimates in each of the trailing four quarters. The stock has gained 7.1 % over the past year.
CRUS POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which equates to Strong Buy in our rating system. CRUS has a grade of B for Value, Growth and Quality. It is currently ranked #1 of 96 stocks in the B-rated Semiconductor & Wireless Chip Industry.
Click here to see the additional POWR Ratings for CRUS (Momentum, Stability, and Sentiment).
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DBX shares rose $0.20 (+0.83%) in after-hours trading Tuesday. Year-to-date, DBX has gained 8.83%, versus a 4.38% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...
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