Growth stocks have outperformed value stocks significantly over the past decade. And thanks to the COVID-19 pandemic, 2020 was also a great year for growth stocks.  An attractive feature of growth companies is than they are often able to increase their revenue and earnings at a faster clip than their industry averages. This quality is typically well rewarded by investors.

As most pandemic-driven challenges and trends are expected to continue this year, growth stocks should continue to dominate the broader market. Although most growth stocks are now trading at lofty valuations, it may still make may make sense to investors to pay a premium to gain exposure to these stocks because they have the capacity to generate huge returns in the long run based on their continued revenue and earnings growth.

Haverty Furniture Companies, Inc. (HVT), Preformed Line Products Company (PLPC) and Big 5 Sporting Goods Corporation (BGFV) are three lesser-known growth companies  that are well-positioned to garner a lot of investor attention because their sound business models are sound.

Haverty Furniture Companies, Inc. (HVT)

HVT operates as a full-service specialty retailer of residential furniture and accessories with more than 120 showrooms in 16 states in the Southern and Midwestern regions. The company  provides its customers with a wide selection of quality merchandise.

HVT’s emphasis on its H Design, combined with its  state-of-the-art technology, is fostering  a strong brand presence. In fact, over the last three quarters, the company has had some success  growing its new retail customer base.

HVT’s EPS has grown at a CAGR of 15.3% over the past three  years. In the third quarter ended September 30, 2020, the company generated $217 million in sales, increasing 3.9% year-over-year. Its total  sales were up 22.8% and comparable store sales rose 22.6% compared to year-ago quarter. Its customer deposits soared $58.3 million,  a 193.5% increase from December 2019. HVT has not experienced any appreciable increase in cancelled sales. Its  EPS came in at $0.97, surging 213% year-over-year.

HVT witnessed a surge in demand for home furnishings last year as people bought new furniture for either their new homes or to transform their existing spaces into home offices amid the pandemic. This, coupled with production and shipping complications, caused supply chain challenges. However, HVT’s vendor relationships and system capabilities gave it  a competitive advantage. The stock is up an impressive 117% over  the past six months and could gain further. Analysts expect HVT’s current year revenue and EPS to grow 11.4% and 47.5%, respectively.

HVT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to Strong Buy in our proprietary rating system. HVT has a grade of A for Growth, Momentum and Quality. In the 64-stock, A-rated  Home Improvement & Goods industry, it is ranked #1. In total, we rate HVT on eight different components. Beyond what we stated above, we have given HVT grades for Value, Stability and Sentiment. Get all HVT’s ratings here.

Preformed Line Products Company (PLPC)

Founded in 1947, PLPC is an international designer and manufacturer of products and systems employed in the construction and maintenance of overhead and underground networks for energy, communications, and broadband network companies. The Company serves its worldwide market through two domestic manufacturing centers located in Arkansas and North Carolina.

Over the past three years, PLPC has grown its revenue and EPS at a CAGR of 7.9% and 25.1%, respectively. For the third quarter ended September 30, 2020, the company reported record revenue of $127.5 million–an increase of 7% year-over-year, on back of improved domestic sales. Despite unfavorable currency exchange rates that  impacted net sales, its EPS for the quarter came in at $2.59, surging 67% compared to the year-ago value of $1.55.

The stock is up 37.8% over the past six months in part because  PLPC is maintaining and steadily growing its U.S. manufacturing footprint. This is driving its innovation and helping the company to provide excellent customer service to both its U.S. and export customer base. In addition , as business and industrial activity picks up further this year, PLPC is well-positioned to grow as demand in its core markets return to pre-pandemic levels.

It is no surprise that PLPC has an overall rating of A, which equates to Strong Buy in our POWR Ratings system. PLPC has a grade of A for both Growth and Momentum. In the 89-stock, B-rated  Industrial – Equipment industry, it is currently ranked #1. Click here to see the additional POWR Ratings for PLPC (Value, Quality, Stability, and Sentiment).

Big 5 Sporting Goods Corporation (BGFV)

BGFV is a leading sporting goods retailer in the western United States, operating 431 stores in 11 states. The company provides products at compelling values, which  include athletic shoes, apparel and accessories, as well as a broad selection of athletic equipment. BGFV also operates an e-commerce platform under the Big 5 Sporting Goods name.

While BGFV’s revenue declined at a CAGR of 1.3%, its EPS has increased at a rate of 18.3%, over the past three years. In the fourth quarter ended January 3, 2021, BGFV’s revenue increased nearly 19% year-over-year to $290.5 million. The revenue increase is attributable primarily to a 2.4% rise in merchandise margins and increased operating leverage from its  improved cost structure. Its same store sales increased 10.5% year-over-year. The company did not report its EPS but expects it to be in a range of $0.90 to $0.93.

Over the course of the last year, BGFV continued to strengthen its balance sheet, growing its  cash and managing its merchandise inventory efficiently. The company reported an exceptional third quarter,  the strongest sales and earnings performance in the company’s 65-year history. In line with its continued earnings momentum, analysts expect its current quarter (ending March 31, 2021) revenues and EPS to grow 12.8% and 130%, respectively.

BGFV’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which equates to Strong Buy. BGFV has a grade of A for Growth, Momentum and Quality. It is ranked #1 of 33 stocks in the A-rated  Athletics & Recreation industry.

In addition to the POWR Ratings grades I have just highlighted, you can see the BGGV’s ratings for Value, Stability and Sentiment here.

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HVT shares were trading at $31.74 per share on Tuesday afternoon, up $0.87 (+2.82%). Year-to-date, HVT has gained 14.71%, versus a 2.30% rise in the benchmark S&P 500 index during the same period.

About the Author: Sidharath Gupta

Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...

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