As the global economy continues to rebound from the COVID-19 pandemic, we can now expect growth rates for companies to slow down. While earnings releases for the third quarter look strong overall, they are not as high as the last two quarters. That is because the first two quarters of this year were being compared to the first two quarters of last year. That was the height of the pandemic.
So, there’s no wonder so many companies saw sky-high growth rates. But as we continue to move on from the pandemic, we can’t expect that type of growth to continue for so many stocks. Even in the next few quarters, overall earnings growth should slow down compared to quarters where companies have already bounced back. However, some companies are still expected to see sky-high growth in the coming years.
But, how do you find them? It’s easy with our POWR Ratings system. All I had to do was run a screen for Buy-rated stocks with a Growth Grade of A or B and a projected earnings rate of over 50% per year over the next five years. Three of my top favorites are Sanderson Farms, Inc. (SAFM), Ulta Beauty, Inc. (ULTA), and SBA Communications Corporation (SBAC).
Sanderson Farms, Inc. (SAFM)
SAFM is a dressed-chicken processor in the United States, producing and selling various fresh, frozen, and value-added chicken products to grocers, food-service operators, and distributors. The company’s product portfolio consists of tray packs and large birds, catering to grocery and food-service customers.
The company recently reported strong results for the third quarter, where both earnings and revenue soared year over year. This performance was driven by a considerable rise in demand and higher prices for products sold to food-service customers. SAFM also saw sustained demand for products sold to retail grocery store customers.
As more food-service operators continued to reopen, the company saw increased demand. Growth was also supported by more consumers dining away from home as pandemic restrictions were lifted. If you have purchased chicken recently, I’m sure you’ve noticed that prices have sky-rocketed. Boneless breast meat rose 71.4% year over year in the third quarter, providing favorable pricing for the company.
SAFM has an overall grade of A, which translates into a Strong Buy rating in our POWR Ratings system. The company has a Growth Grade of A as earnings are expected to soar 112.7% per year over the next five years. SAFM also has a Value Grade of B, which isn’t surprising, with a forward P/E of 15.77. We also provide Momentum, Stability, Sentiment, and Quality grades for SAFM, which you can find here.
SAFM is ranked #6 in the Food Makers industry. For more top stocks in this industry, click here.
Ulta Beauty, Inc. (ULTA)
ULTA is the largest specialized beauty retailer in the U.S., with approximately 1,300 stores. The company offers makeup, fragrances, skincare and haircare products, and bath and body items. In all stores, the firm also provides private-label products and merchandise from more than 500 vendors, plus salon services, including hair, makeup, skin, and brow services.
The company has been gaining on its omnichannel strength. This was evident in its second-quarter results that were reported last month. Both its top and bottom lines rose year over year. In fact, net sales soared 60.2% year over year. This was due to increased consumer confidence and the relaxation of pandemic restrictions.
ULTA has also benefited from its initiatives to boost online promotions. As more consumers get excited about online sales, management is expanding capacity at fulfillment centers and extending its ship from store capabilities and curbside pickups. The company also saw growth in its brick-and-mortar channel as more consumers returned to stores.
The firm has an overall grade of B and a Buy rating in our POWR Ratings service. ULTA has a Growth Grade of B as analysts forecast earnings to surge 58.58% per year over the next five years. The company also has a Quality Grade of A due to a rock-solid balance sheet. ULTA currently has a current ratio of 1.8, which indicates it has more than enough liquidity to handle any short-term obligations.
For the rest of ULTA’s grades (Value, Momentum, Stability, and Sentiment), click here. ULTA is ranked #12 in the Specialty Retailers industry. For more top stocks in this top-ranked industry, click here.
SBA Communications Corporation (SBAC)
SBAC owns and operates roughly 33,000 cell towers throughout North America, South America, and Africa. It leases space on its towers to wireless service providers, who install equipment on the towers to support their wireless networks. The company has a very concentrated customer base, with the most revenue in each market being generated by just the top few mobile carriers.
The company has been expanding its tower portfolio as it seeks new growth opportunities. Management is focused on extending its business into international markets with high growth characteristics. So far, SBAC has developed or acquired thousands of towers in Central and South America and Canada.
In the most recent quarter alone, SBAC acquired 57 communication sites. After quarter-end, it purchased or agreed to purchase 1,800 communication sites, with most transactions expected to close by the end of the first quarter in 2022. The company is also benefiting from subscriber growth, as it boosts the wireless tower industry. This is due to the increased use of smartphones and tablets, creating strong demand for tower leasing.
SBAC has an overall grade of B, translating into a Buy rating in our POWR Ratings system. The company has a Growth Grade of B, which makes sense as its earnings are expected to surge 189.32% per year over the next five years. SBAC also has a Sentiment Grade of B as it is well-liked by the analyst crowd. Sixteen out of eighteen Wall Street analysts rate the stock a Buy or Strong Buy.
To access all SBAC’s grades (Value, Momentum, Stability, and Quality), click here. SBAC is ranked #3 in the Telecom – Domestic industry. For more top-ranked stocks in this industry, make sure to click this link.
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This article was written by David Cohne, Chief Value Strategist for StockNews.com. David has helped investors find the most profitable stocks for over 20 years.
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SAFM shares were unchanged in premarket trading Friday. Year-to-date, SAFM has gained 44.48%, versus a 23.29% rise in the benchmark S&P 500 index during the same period.
About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More...
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