President Biden’s ambitious multi-trillion-dollar infrastructure spending plan is getting closer to becoming a reality. “There was universal agreement in that room that we have to come to an agreement, and we want to get it done this week,” said Senate Majority Leader Chuck Schumer, commenting on the status of the pending bill. If passed, the massive federal spending it includes should boost the economy as a whole.

In addition, jobless claims are declining significantly. Weekly jobless claims have hit a pandemic-era low for two straight weeks. Furthermore, the unemployment rate had fallen 10 percentage points from its peak in April last year. The U.S labor market is gradually edging closer to its pre-pandemic level.

And the stock market has been performing well, with the S&P and the Dow Jones gaining more than 5% for  the month and rallying to fresh highs last week. Given this backdrop, we believe stocks with strong growth potential, Steel Dynamics, Inc. (STLD), Exelixis, Inc. (EXEL), and Conn’s, Inc. (CONN), could be ideal bets now.

Steel Dynamics, Inc. (STLD)

STLD in Fort Wayne, Ind., operates as a steel-producing and metal recycling company that functions through Steel Operations; Metal Recycling Operations, and Steel Fabrication Operations. The company produces hot and cold roll steel products, it purchases and processing scrap ferrous and non-ferrous metals, and produces steel building components.

On October 14, STLD agreed with a North American metal products manufacturer, New Process Steel, L.P., to acquire a minor equity interest. The acquisition is expected to grow STLD’s exposure to value-added manufacturing opportunities.

In July, STLD announced that its board of directors had authorized a share repurchase program of up to $1 billion of its common stock. This action highlights the company’s confidence in its cash flow generation and its ability to create value for shareholders.

STLD’s revenue has increased at a 16.1% CAGR over the past five years. Its net income has increased at a 21.4% CAGR over the past three years, while EPS improved at a 26.4% CAGR over the same period.

For the third fiscal quarter, ended September 30, STLD’s net sales increased 118.3% year-over-year to $5.09 billion. Its operating income improved 748.2% from the prior-year quarter to $1.32 billion. Its net income attributable to STLD came in at $990.76 million, up 889.3% from the same period last year, and its EPS climbed 931.9% year-over-year to $4.85.

A $5.66 consensus EPS estimate for the current quarter (ending December 2021) indicates a 483.5% increase from the prior-year quarter. Likewise, the $5.14 billion consensus revenue estimate for the current quarter reflects a 97.5% year-over-year rise. Moreover, STLD has an impressive surprise earnings history; it has topped consensus EPS estimates in three out of the trailing four quarters. EPS is expected to grow 35.8% per annum over the next five years.

The stock has gained 94.9% in price over the past year and 72.2% year-to-date to close Friday’s trading session at $63.50.

STLD’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

STLD has an A Momentum grade, and a Growth, Value, and Quality grade of B. In the 32-stock Steel industry, it is ranked #16. The industry is rated A. Click here to see the additional POWR Ratings for STLD (Stability and Sentiment).

Exelixis, Inc. (EXEL)

EXEL is a San Francisco, Calif.-based biotechnology company that is focused on oncology that develops and sells medicines to cure cancer. The company has research collaborations and license agreements with several notable pharmaceutical and biotech companies.

On October 14, EXEL assumed responsibility for future clinical development and commercialization of a novel anti-cancer compound from biotech company Aurigene Discovery Technologies Limited. The in-license collaboration should strengthen EXEL’s pipeline and garner significant returns in the extended period through the commercialization of the drug.

Also this month, the company entered a collaboration and licensing agreement with STORM Therapeutics, a biopharmaceutical company, to advance drug leads for treating cancer. The partnership should enable EXEL to expand its portfolio of differentiated small molecule therapies and grow in oncology.

In September, EXEL drug CABOMETYX® received the United States Food and Drug Administration (FDA) approval to treat locally advanced or metastatic differentiated thyroid cancer (DTC). Regarding this approval, Michael M. Morrissey, Ph.D., President, and Chief Executive Officer, Exelixis, said, “This approval of CABOMETYX builds on our existing legacy of delivering transformational medicines for patients with difficult-to-treat forms of cancer.”

EXEL has an impressive growth history. The company’s revenue has increased at a 74.5% CAGR over the past five years, while its levered FCF has increased at a 41.4% CAGR over the past three years.

EXEL’s total revenues increased 48.4% year-over-year to $385.18 million in its second fiscal quarter, ended June 30. Its income from operations rose 62.9% from the same period last year to $123.01 million. Its non-GAAP net income and non-GAAP net income per share stood at $117.89 million and $0.37, respectively, registering a 48.5% and 48% year-over-year improvement.

The Street’s $0.19 EPS for the current quarter (ending December 2021) reflects an 111.1% year-over-year increase. Likewise, the Street’s $380.54 million revenue estimate for the current quarter indicates a rise of 40.9% from the prior-year quarter. EPS is expected to grow 46% per annum over the next five years.

EXEL’s stock has gained 27.9% in price over the last three months to close Friday’s trading session at $21.40. It has gained 5.2% over the past month.

It’s no surprise that EXEL has an overall A rating which translates to Strong Buy in our POWR Ratings system. The stock has an A grade for Value, and a B grade for Growth, Sentiment, and Quality. It is ranked #5 out of the 509 stocks in the Biotech industry.

To see the additional POWR Ratings for Momentum and Stability for EXEL, click here.

Note that STLD is one of the few stocks handpicked by our Chief Value Strategist, David Cohne, currently in the POWR Value portfolio. Learn more here.

Click here to checkout our Healthcare Sector Report for 2021

Conn’s, Inc. (CONN)

CONN is a specialty retailer of durable consumer products. The company’s offerings include furniture, home appliances, consumer electronics, and home office products, as well as product support services and short- and medium-term financing. The Woodlands, Tex., company operates through the segments of Retail and Credit.

In June, CONN opened two showrooms in Lakeland and Orange City in Florida as part of its expansion plan across the state. The showroom establishments are expected to enhance the company’s ability to better serve its customers.

CONN’s EBIT has increased at a 22.4% CAGR over the past three years, while its net income has improved at a CAGR of 49.3% over the past three years. In addition, EPS has increased at 53.7% CAGR over the last three years.

For its second fiscal quarter, ended July 31, CONN’s total revenues increased 14% year-over-year to $418.38 million. Its operating income gained 30.8% from the prior-year quarter to $54.21 million. Its adjusted net income rose 70.4% from the same period last year to $37 million, while its adjusted EPS came in at $1.22, registering a 62.7% increase year-over-year.

Analysts expect CONN’s EPS to improve 6,566.7% from the prior year to $4.00 in the current year (fiscal 2022). Likewise, the Street expects its revenue to increase 14.2% year-over-year to $1.58 billion in the current year. Also, CONN has beaten consensus EPS estimates in each of the trailing four quarters. The company’s EPS is expected to grow 23% per annum over the next five years.

The stock has gained 112.1% in price over the past year and 106.2% year-to-date to close Friday’s trading session at $24.11.

CONN’s POWR Ratings reflect this promising outlook. The stock has an overall A rating which equates to Strong Buy in our proprietary rating system. CONN has an A grade for Value, Momentum, and Quality, and a B grade for Growth and Sentiment. It is ranked #2 of 42 stocks in the Specialty Retailers industry. This industry is rated B.

In addition to the POWR Rating grades we’ve stated above, one can see CONN ratings for Stability here.

STLD shares were trading at $67.38 per share on Monday afternoon, up $3.88 (+6.11%). Year-to-date, STLD has gained 85.31%, versus a 23.02% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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