Even though a resurgence of COVID-19 cases and high inflation have been worrying investors about the pace of the economic recovery, growth stocks have been witnessing increased attention lately. This is evident from the SPDR Portfolio S&P 500 Growth ETF’s (SPYG) 11.3% return over the past three months compared to the SPDR Portfolio S&P 500 Value ETF (SPYV) and the SPDR S&P 500 Trust ETF’s (SPY) 1.4% loss and 5.1% gain, respectively.
While the Federal Reserve could raise interest rates as early 2023 and recently indicated its willingness to reduce asset purchases before the end of the year, rates have been kept near zero for now. In addition, Fed Chair Jerome Powell reiterated that high inflation is “temporary.” Moreover, there was a substantial decline in the unemployment rate. Also, the Conference Board expects the U.S. real GDP growth to rise to 7% in the third quarter.
So, it could be wise to bet on fundamentally sound stocks ArcelorMittal (MT), Ulta Beauty, Inc. (ULTA), Texas Roadhouse, Inc. (TXRH), and Sanderson Farms, Inc. (SAFM) that possess solid growth attributes. Their earnings are expected to increase at a rate of at least 50% per annum over the next five years.
MT owns and operates steel manufacturing and mining facilities. The company’s main steel products include semi-finished flat products, finished flat products, semi-finished long products, and seamless and welded pipes and tubes. In addition, its mining products comprise iron ore lumps, fines, concentrates, pellets, and sinter feeds.
On September 10, 2021, MT signed an amendment to the Mineral Development Agreement, which paves the way for expanding the company’s mining and logistics operations in Liberia. Aditya Mittal, MT’s CEO, said, “This project is an important component of our strategic growth programme, designed to ensure ArcelorMittal captures the best organic growth opportunities within our business.”
The company’s sales surged 76.2% year-over-year to $19.34 billion for the second quarter that ended June 30, 2021. MT’s EBITDA grew 614.6% year-over-year to $5.05 billion. Its net income came in at $4 billion, representing a 75.3% sequential increase. MT’s EPS came in at $3.47, up 78.9% sequentially.
Analysts expect MT’s EPS and revenue to increase 2,536.8% and 64.7% year-over-year to $4.63 and $21.85 billion, respectively, for the quarter ending September 30, 2021. In addition, its EPS is expected to grow at a rate of 272.2% per annum over the next five years. Also, it surpassed Street EPS estimates in three of the trailing four quarters. The stock has gained 158.7% over the past year to close Friday’s trading session at $32.65.
MT’s POWR Ratings reflect solid prospects. The company has an overall grade of A, which translates to a Strong Buy rating in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
In addition, it has an A grade for Growth, Sentiment, and Momentum, and a B grade for Value and Quality. Click here to see the additional POWR Ratings for MT (Stability). MT is ranked #4 out of 33 stocks in the A-rated Steel industry.
Ulta Beauty, Inc. (ULTA)
Beauty products retailer ULTA’s stores offer cosmetics, fragrances, skincare and haircare products, bath and body products, and salon styling tools. It distributes its products through its website, ulta.com, and mobile applications.
In July 2021, ULTA and Target Corporation (TGT) shared details about the highly anticipated ULTA at TGT, slated to begin rolling out in more than 100 TGT stores nationwide and online with more than 50 specially curated prestige brands. Kecia Steelman, ULTA’s COO, said, “Ulta Beauty at Target reflects our commitment to drive the industry forward and keep our guests meaningfully engaged.”
ULTA’s net sales surged 60.2% year-over-year to $1.97 billion for the fiscal second quarter that ended July 31, 2021. The company’s operating income grew 2,505.3% year-over-year to $332.31 million, while its net income came in at $250.89 million, representing a 3,015.9% year-over-year increase. Its EPS came in at $4.56, up 3,157.1% year-over-year.
For fiscal 2021, analysts expect ULTA’s EPS and revenue to increase 220.6% and 35.2% year-over-year to $14.94 and $8.32 billion, respectively. In addition, its EPS is expected to grow at a rate of 56.9% per annum over the next five years. Also, it surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has gained 61.5% over the past year to close Friday’s trading session at $374.82.
ULTA’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, which equates to a Buy in our proprietary ratings system. In addition, it has an A grade for Quality, and a B grade for Growth and Sentiment.
Texas Roadhouse, Inc. (TXRH)
Restaurant company TXRH operates and franchises Texas Roadhouse and Bubba’s 33 restaurants. It also operates 537 domestic restaurants and 97 franchise restaurants. It offers its guests a selection of chicken, beef, fish, seafood, and other items.
On July 29, 2021, Jerry Morgan, the CEO of TXRH, said, “Our strong cash flows have further strengthened our financial position which allowed us to reinstate our dividend and repay our short-term debt this quarter. In addition, our development pipeline looks great and continues to move forward as expected.”
The company’s total revenue surged 88.7% year-over-year to $898.79 million for the second quarter that ended June 29, 2021. TXRH’s income from operations came in at $89.73 million, compared to an operating loss of $47.32 million in the prior-year quarter. Its net income came in at $75.48 million, compared to a loss of $33.55 million in the year-ago period. Also, its EPS for the quarter came in at $1.08, compared to a loss per share of $0.48 in the previous year.
TXRH’s EPS and revenue are expected to increase 715.6% and 43.9% year-over-year to $3.67 and $3.45 billion, respectively, in fiscal 2021. In addition, its EPS is expected to grow at a rate of 94.1% per annum over the next five years. Also, it surpassed Street EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 45.2% to close Friday’s trading session at $91.94.
TXRH’s POWR Ratings reflect this promising outlook. The company has an overall grade of B, which translates into a Buy rating in our proprietary ratings system.
The stock has a B grade for Growth, Value, and Quality. Within the A-rated Restaurants industry, TXRH is ranked #23 of 45 stocks. Click here to see the additional POWR Ratings for TXRH (Momentum, Stability, and Sentiment).
Sanderson Farms, Inc. (SAFM)
Integrated poultry processing company SAFM produces, processes, markets, and distributes fresh, frozen, and prepared chicken products. The company sells ice-packed, chill-packed, bulk-packed, and frozen chicken primarily under the Sanderson Farms brand name to retailers, distributors, and casual dining operators.
On August 9, 2021, Cargill, Continental Grain Company, and SAFM announced they had reached a definitive agreement for a joint venture between them to acquire SAFM. Joe Sanderson, Chairman and CEO of SAFM, said, “We are proud to be joining with Cargill and Continental Grain and we are confident that they will be strong stewards of the Sanderson Farms team, brand and assets going forward.”
SAFM’s net sales surged 41.4% year-over-year to $1.35 billion for the fiscal third quarter that ended July 31, 2021. In addition, the company’s total assets grew 16.6% year-over-year to $2.16 billion. Its net income came in at $164.76 million, representing a 402.2% year-over-year increase. Also, its EPS came in at $7.38, up 398.6% year-over-year.
The company’s EPS and revenue are expected to increase 1,273.2% and 31.1% year-over-year to $17.44 and $4.67 billion, respectively, in fiscal 2021. In addition, its EPS is expected to grow at a rate of 112.7% per annum over the next five years. Also, it surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 47.6% to close Friday’s trading session at $187.15.
It’s no surprise that SAFM has an overall grade of A, which equates to a Strong Buy rating in our POWR Ratings system. In addition, the stock has an A grade for Growth, and a B grade for Value and Quality.
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MT shares were trading at $32.80 per share on Monday afternoon, up $0.15 (+0.46%). Year-to-date, MT has gained 44.37%, versus a 19.60% 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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