The decades-high inflation and the Fed’s hawkish stance with a likely 75 basis point hike in July have led to recession fears. According to a Reuters poll of economists, the likelihood of a recession over the next year rose to 40%.
Nevertheless, a strong labor market growth seems to have somewhat regained investors’ confidence in the stock market lately. Rob Williams, managing director of financial planning at the Schwab Center for Financial Research, said, “In a down market, every dollar you can invest goes further, with more room to grow over time.”
Moreover, the SPDR Portfolio S&P 500 Growth ETF (SPYG) has gained 2.3% over the past month, outperforming the 1.3% gains of the S&P 500 over the same period.
Therefore, we think the growth stocks Alpha Metallurgical Resources, Inc. (AMR), Cenovus Energy Inc. (CVE), and Diamondback Energy, Inc. (FANG) could be ideal additions to one’s portfolio.
Alpha Metallurgical Resources, Inc. (AMR)
AMR is a mining company that produces, processes, and sells met and thermal coal in Virginia and West Virginia. The company operates active mines and coal preparation and load-out facilities.
On June 3, 2022, AMR made a voluntary prepayment of $99.40 million on its term loan, thereby eliminating all the remaining principal and paying the long-term debt in full. This should mark a significant step in the company’s efforts to strengthen its balance sheet. Additionally, the company announced a $600 million share repurchase program.
AMR’s total revenues increased 177.5% year-over-year to $1.07 billion in the fiscal quarter that ended March 31, 2022. Its income from operations grew 2,845.7% from the year-ago value to $453.09 million. The company’s net income increased 1,317.5% year-over-year to $400.89 million, while its income per share came in at $20.52, up 1,252.8% from the prior-year quarter.
AMR's revenue has grown at a 10.9% CAGR over the past three years. Its EBITDA has grown at a 47.6% CAGR over the past three years, while its EPS has grown at a 27.8% CAGR over the same period.
The consensus EPS estimate of $26.10 for the quarter ending September 2022 represents a 493.3% year-over-year improvement. The consensus revenue estimate of $1.13 billion for the same quarter represents a 74% increase from the same period last year. AMR also beat the consensus EPS estimates in each of the trailing four quarters.
AMR has gained 461.7% over the past year and 124.9% over the past six months to close the last trading session at $133.96.
AMR’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
AMR also has an A grade in Growth and a B in Momentum, Quality, and Value. It is ranked #3 of 11 stocks in the A-rated Coal industry.
Beyond what is stated above, we’ve also rated AMR for Stability and Sentiment. Get all the AMR ratings here.
Cenovus Energy Inc. (CVE)
Headquartered in Calgary, Canada; CVE develops, produces, and markets crude oil, natural gas liquids, and natural gas through Oil Sands; Conventional; Offshore; Canadian Manufacturing; U.S. Manufacturing; and Retail segments.
On June 13, CVE announced that it had agreed to purchase the remaining outstanding 50% interest in the Sunrise oil sands project in northern Alberta. “By applying Cenovus’s advanced operating techniques, we expect to increase production at Sunrise while driving down sustaining capital, operating costs and emissions intensity,” said Alex Pourbaix, CVE’s President & CEO.
On May 31, 2022, the company and its partners agreed to restart the West White Rose Project offshore Newfoundland and Labrador. First oil from the platform is expected in the first half of 2026, with production projected to reach approximately 80,000 barrels per day by 2029. This is expected to enhance the company’s operative capability.
For the fiscal quarter that ended March 31, 2022, CVE’s revenue increased 74.3% year-over-year to C$16.20 billion ($12.54 billion). Its net earnings grew 638.6% from the year-ago value to C$1.63 billion ($1.26 billion). Net earnings per share for the quarter stood at C$0.79, reflecting a 690% increase year-over-year.
CVE's revenue has grown at a 33.5% CAGR over the past five years. Its total assets have grown at a 15.6% CAGR over the past three years, while its EBITDA has grown at a 38.2% CAGR over the same period.
Street expects CVE’s revenue in the fiscal quarter ending June 2022 to come in at $13.56 billion, indicating an increase of 52% year-over-year. Its EPS is expected to improve 765.9% year-over-year to $0.87.
CVE’s shares have gained 109.6% over the past year and 44% over the past nine months to close the last trading session at $16.89.
CVE’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our POWR Rating system.
The company has an A grade in Sentiment and Momentum and a B in Growth and Value. CVE is ranked #12 of 97 stocks in the B-rated Energy - Oil & Gas industry. To get CVE’s ratings for Stability and Quality, click here.
Diamondback Energy, Inc. (FANG)
FANG operates as an independent oil and natural gas company that acquires, develops, and explores unconventional and onshore oil and natural gas reserves in the Permian Basin in West Texas.
On June 21, FANG declared an increase in its return of capital commitment to at least 75% of free cash flow, 25% higher than its previous commitment. Additionally, the company announced its intention to increase its base dividend to $3.00 per share annually. FANG’s enhanced capital return framework is expected to increase its shareholder value.
On May 16, FANG announced that it had entered into a definitive agreement to acquire all of the publicly held common units representing the limited partner interests in Rattler Midstream LP (RTLR). Travis Stice, Chief Executive Officer of FANG and of the general partner of RTLR, said, “This merger will allow both companies to benefit from the simplicity and scale of the combined entity going forward.”
FANG’s total revenues increased 103.4% year-over-year to $2.41 billion in the fiscal first quarter of 2022. Its income from operations grew 190.7% from the year-ago value to $1.66 billion, while the net income attributable to the company improved 254.1% year-over-year to $779 million. Its EPS increased 227.8% from its year-ago value to $4.36.
FANG's revenue has grown at a 62.4% CAGR over the past five years and a 46.4% CAGR over the past three years. Its EBITDA has grown at a 42.2% CAGR over the past three years.
Analysts expect FANG’s EPS for the fiscal quarter ended June 2022 to come in at $6.66, indicating an increase of 177.4% year-over-year. Its revenue is expected to grow 44.5% year-over-year to $2.43 billion in the same period. The company also surpassed the consensus EPS estimates in all the trailing four quarters.
Over the past year, the stock has gained 46.8% to close the last trading session at $113.43.
It is no surprise that FANG has an overall rating of B, equating to Buy in our POWR Ratings system. The stock has an A grade in Momentum and a B in Quality. In the Energy - Oil & Gas industry, FANG is ranked #25.
In addition to the POWR Ratings grades I’ve just highlighted, you can see the FANG’s ratings for Value, Growth, Sentiment, and Stability here.
AMR shares were trading at $142.92 per share on Monday afternoon, up $8.96 (+6.69%). Year-to-date, AMR has gained 134.71%, versus a -16.03% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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