The U.S. stock market has been volatile since the Federal Reserve’s comment last week that interest rate hikes could come as soon as 2023, after saying as recently as March that it saw no increases coming until at least 2024. With several stocks currently trading at sky-high valuations, investors are also anticipating a market correction. Against this backdrop, investors are turning to quality growth stocks because they are expected to generate market-beating returns over the long run, dodging the short-term fluctuations.
Investors’ relatively heightened interest in growth stocks is evidenced by the SPDR Portfolio S&P 500 Growth ETF’s (SPYG) 4.9% gains over the past month compared to the SPDR Portfolio S&P 500 Value ETF’s (SPYV) 2.9% loss. Growth stocks’ performance also compares favorably with SPDR S&P 500 Trust ETF’s (SPY) 0.7% returns over the same period.
U.S. real GDP is expected to rise 9% in the second quarter of 2021, according to The Conference Board. This bodes well for stocks that possess solid growth attributes. So, we think it could be wise to bet on Hologic, Inc. (HOLX), EchoStar Corporation (SATS), and ArcBest Corporation (ARCB). These names have solid growth prospects. Indeed, Wall Street analysts expect the prices of these stocks to soar more than 35% in the near-term.
Hologic, Inc. (HOLX)
HOLX develops, manufactures, and supplies diagnostics products, medical imaging systems, and surgical products for women’s health through early detection and treatment. It operates through four segments: diagnostics, breast health, GYN surgical, and skeletal health. The company provides Aptima SARS-CoV-2 and Panther Fusion SARS-CoV-2 assays for the detection of SARS-CoV-2.
On June 17, 2021, HOLX completed its acquisition of Mobidiag Oy, which is an innovator in near-patient, acute care molecular diagnostic testing. Jan Verstreken, HOLX’s group president, international said “Closing the acquisition of Mobidiag enables us to become a broader, more diversified global diagnostics leader.”
The company’s revenue surged 103.4% year-over-year to $1.54 billion for its fiscal second quarter, ended March 27, 2021. Its non-GAAP gross profit grew 150.1% year-over-year to $1.15 billion. Its non-GAAP net income was $673.2 million, which represents a 348.8% year-over-year increase. HOLX’s non-GAAP EPS was $2.59, up 354.4% year-over-year. Its revenue and EBIT have increased at CAGRs of 18.6% and 65.3%, respectively, over the past three years.
For its fiscal year 2021, analysts expect HOLX’s EPS and revenue to increase 91.5% and 38.5%, respectively, year-over-year to $7.62 and $5.23 billion. It surpassed the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 18% over the past year to close Friday’s trading session at $62.61. Wall Street analysts expect the stock to hit $84.71 in the near term, which indicates a potential 35.3% upside.
HOLX’s POWR Ratings reflect solid prospects. The company has an overall B rating, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting. It has an A grade for Growth and Value, and a B grade for Quality.
EchoStar Corporation (SATS)
SATS, together with its subsidiaries, provides broadband satellite technologies and broadband Internet services. It operates in two segments: Hughes and EchoStar Satellite Services (ESS). The ESS segment provides satellite services using its owned and leased in-orbit satellites and related licenses on a full-time or occasional-use basis to the United States government service providers.
HughesNet, an SATS company, announced on April 6, 2021, that it had secured additional capacity over Puerto Rico. The capacity increase is expected to enhance the customer experience for current HughesNet customers across Puerto Rico and enable the company to serve even more customers across the island with affordable, reliable internet access.
SATS’ revenue increased 3.6% year-over-year to $482.58 million for the first quarter ended March 31, 2021. Its adjusted EBITDA grew 25% year-over-year to $185.74 million. Its net income came in at $77.57 million compared to a $57.74 million net loss in the prior-year period. Its EPS came in at $0.84, compared to a $0.56 loss per share in the year-ago period. The company’s levered FCF has increased at a 1.6% CAGR over the past three years.
Analysts expect SATS’ EPS to come in at $1.19 in its fiscal year 2021, which represents a 390.2% year-over-year increase. It surpassed consensus EPS estimates in each of the trailing four quarters. Its revenue is expected to increase 9.7% year-over-year to $479.20 million for the current quarter, ending June 30, 2021. The stock has rallied 31.9% over the past six months to close Friday’s trading session at $26.90. SATS is expected to hit $46 in the near term, which indicates a potential 71% upside. It’s no surprise that SATS has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has a B grade for Growth, Value, and Quality.
ArcBest Corporation (ARCB)
ARCB provides freight transportation and integrated logistics services. It operates through three segments: asset based, ArcBest, and FleetNet. Its asset-based segment transports general commodities, such as food and textiles, while its ArcBest segment provides expedited freight transportation services to commercial and government customers.
Judy R. McReynolds, the company’s CEO, said on May 4, 2021, “These strong results reflect our ability to create solutions to support our customers as they continue to face supply chain challenges associated with their rebound from the COVID-19 pandemic.”
ARCB’s net sales increased 18.2% year-over-year to $829.21 million for its fiscal first quarter ended March 31, 2021. Its non-GAAP operating income grew 214.8% year-over-year to $39.10 million. Its non-GAAP net income increased 190.7% year-over-year to $27.22 million. ARCB’s non-GAAP EPS came in at $1.01, up 180.5% year-over-year. Its EPS and EBIT have increased at 6.5% and 15.7% CAGRs, respectively, over the past three years.
The company’s EPS and revenue are expected to increase 135.8% and 41.2%, respectively, year-over-year to $1.58 and $907.54 million for the current quarter, ending June 30, 2021. It surpassed the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 118.7% over the past year to close Friday’s trading session at $54.15. Analysts expect the stock to hit $90.17 in the near term, indicating a potential 66.5% upside.
ARCB’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary ratings system. The stock has an A grade for Growth and Value, and a B grade for Momentum and Sentiment.
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HOLX shares were trading at $63.05 per share on Monday morning, up $0.44 (+0.70%). Year-to-date, HOLX has declined -13.43%, versus a 12.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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