Growth in earnings is a powerful indicator of a company’s financial strength. A company with an earnings growth trend is much more likely to see gains in its stock price as well. This year has been difficult for most companies due to the challenges posed by the pandemic. However, there are certain standout stocks that have not only just sustained their prior performance levels, but have also modified their business models to capitalize on the rapidly changing consumer behavior triggered by the pandemic. Based on their strong footing in the “new normal” economy, analysts expect these companies to witness significant earnings growth in the upcoming quarters and years ahead.
A large number of these stocks are from the technology sector, which has significantly outperformed the rest of the market so far this year, and are well positioned to see substantial earnings growth. There are some companies from other sectors as well that have also delivered stellar earnings performance, and are projected to see continued huge earnings growth due tobecause of the underlying strength in their business models.
Square, Inc. (SQ), Twilio, Inc. (TWLO), Sunrun, Inc. (RUN), and Azure Power Global, Ltd. (AZRE) have seen astonishing price gains year-to-date, and their earnings growth potential should help them see further momentum in their stock prices.
Square, Inc. (SQ)
SQ develops and delivers point-of-sale services globally. The Square Register system helps businesses with inventory, sales reports, and digital receipts. It also facilitates feedback and provides analytics. SQ’s stock has gained 201.5% so far this year.
For the second quarter that ended June 2020, the company reported an EPS of $0.18, beating the consensus estimate by 460%. The company’s EPS is expected to increase 114.3% in 2021 and at a rate of 35.8% per annum over the next five years. SQ’s revenue is expected to grow 227.6% this year and 27.1% in 2021.
SQ is working on launching its own loan company in 2021 that will provide loans and direct deposits through its Cash app. The company has also announced On-Demand Pay, which will allow users to transfer up to $200 to the Cash App for free or to a linked debit card for a small fee.
How does SQ stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
A for Peer Grade
A for Industry Grade
A for Overall POWR Rating
The stock is also ranked #2 out of 211 stocks in the Financial Services (Enterprise) industry.
Twilio, Inc. (TWLO)
TWLO has a cloud communications platform that allows users to build and operate communications functionality within software applications. The company operates with a pay-as-you-go model in the United States and globally. The company’s stock has gained 231.6% so far this year.
For the second quarter that ended June 2020, TWLO reported an EPS of $0.09, delivering an earnings surprise of 200%. The company’s EPS is expected to increase 118.2% in 2021 and at a rate of 20.5% per annum over the next five years. TWLO’s revenue is expected to grow 41.3% in 2020 and 27.4% in 2021.
TWLO has recently acquired Segment, which is a customer data platform, for $3.2 billion. The company is also providing communications support for contract tracing towards the effort to stop the spread of the coronavirus.
It’s no surprise that TWLO is rated a “Strong Buy” in our POWR Ratings system, with a grade of “A” in Trade Grade, Buy & Hold, and Peer Grade. In the 11-stock Software – SAAS industry, it is ranked #1.
Sunrun, Inc. (RUN)
RUN develops, produces, and markets solar energy systems for residential use. The company’s products also help the maintenance of installed solar energy systems. RUN’s stock has gained 364.9% so far this year.
RUN’s EPS is expected to increase 10% next quarter and 400% in 2021. The company’s revenue is expected to grow 3% in the next quarter and 45.8% in 2021.
RUN has recently acquired a rival solar energy company, Vivint Solar, for $22 billion. This move establishes RUN as the leader in the residential solar energy space in the United States with an estimated 500,000 customers. RUN has also signed contracts with three CCAs to provide clean energy to approximately one million homes in the Bay area. RUN has also partnered with CHANEL to provide access to solar energy to nearly 30,000 low-income households in California.
In our POWR Ratings, RUN has a grade of “B” in Trade Grade and Industry Rank. In the 15-stock Solar industry, it is ranked #7.
Azure Power Global, Ltd. (AZRE)
AZRE produces and distributes solar-based electricity. The company also offers solar energy installations. The company primarily focuses on selling to commercial outfits, government utilities, and independent industries. AZRE’s stock has gained 118.7% so far this year.
For the quarter that ended June, AZRE reported an EPS of $0.01, beating the consensus estimate by 105.3%. The company’s EPS is expected to increase 110.8% in 2021 and at a rate of 108% per annum over the next five years. AZRE’s revenue is expected to grow 22.7% in 2021 and 42.2% in 2022.
AZRE has secured a letter of award to provide 2GW of solar power along with the Solar Energy Corporation of India. The combined capacity for the project is 4GW which can be built anywhere in India. In the quarter that ended in June, the company’s operating energy capacity increased 12% as compared to the same period last year. Revenue increased 16% during the same period.
AZRE’s strong fundamentals are reflected in its POWR Ratings. It has a “Buy” rating with an “A” in Trade Grade. In the 15-stock Solar industry, it is ranked #6.
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SQ shares were trading at $187.47 per share on Friday afternoon, down $1.13 (-0.60%). Year-to-date, SQ has gained 199.66%, versus a 10.07% rise in the benchmark S&P 500 index during the same period.
About the Author: Aaryaman Aashind
Aaryaman is an accomplished journalist that’s passionate about providing in-depth insights about investing and personal finance. Recently he has been focused on the stock market and he specializes in evaluating high-growth stocks. More...
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