Investors are awaiting the impact of multi-decade high inflation and the Fed’s aggressive interest rate hikes on corporate profits this earnings season. A possible interest rate hike of 75 basis points this month and the risk of a recession in the next 12 months greatly concern investors.
However, resilient consumer spending and several better-than-expected earnings reports released restored investor confidence in the market, allowing benchmark indexes to rebound occasionally.
Although the uncertainty persists, substantial investments and increased focus on encouraging domestic production should help growth-focused companies to benefit substantially.
Investors’ interest in growth stocks is evident from the iShares Russell 1000 Growth ETF’s (IWF) 8.9% gains over the past month versus SPDR S&P 500 Trust ETF’s (SPY) 7.2% returns.
Therefore, shares of fundamentally sound companies Hugo Boss AG (BOSSY), DLH Holdings Corp. (DLHC), Genuine Parts Company (GPC), Valhi, Inc. (VHI), and Merck & Co., Inc. (MRK), which possess solid growth attributes and broad market reach, could be ideal additions to your portfolio now.
Hugo Boss AG (BOSSY)
Based in Germany, BOSSY develops, markets, and distributes clothes, shoes, accessories, and licensed products, including fragrances, eyewear, and watches for men, women, and children worldwide. The company markets and sells its products under the BOSS and HUGO brand names through online stores, shop-in-shops, and factory outlets.
On July 19, 2022, BOSSY, via its HUGO BOSS Trade Mark Management GmbH & Co. KG, extended its BOSS Kidswear license agreement with the Children Worldwide Fashion SAS (CWF Group), a French luxury and premium brand children’s collections, to the HUGO Brand.
Expected to launch HUGO Kids as of spring 2023, the exclusive license covers the design, production, and worldwide distribution of a HUGO Kids collection developed for boys and girls aged 4-16. This is in sync with BOSSY’s CLAIM 5 Strategy, which aims to expand its business across all regions, touchpoints, brands, and product areas.
For its fiscal 2022 first quarter ended March 31, 2022, BOSSY’s sales increased 55.3% year-over-year to €772 million ($790.43 million). The company’s gross profit came in at €476 million ($487.36 million), representing a 58.7% rise from its year-ago period. Its EBIT came in at €40 million ($40.95 million) for the quarter, increasing substantially from the prior-year period.
BOSSY’s net income came in at €26 million ($26.62 million), compared to a loss of €8 million ($8.19 million) in the prior-year period. Its EPS came in at €0.35, versus a €0.13 loss per share in the year-ago period. It had €234 million ($239.59 million) in cash and cash equivalents as of March 31, 2022.
The consensus revenue estimate of $3.51 billion for fiscal 2022 ending December 31, 2022, indicates a 14.6% year-over-year improvement. It surpassed Street EPS estimates in three of the trailing four quarters.
BOSSY’s forward EBITDA growth of 40.6% over the past year, 119.5% above the industry average of 18.3%. Its forward operating cash flow growth of 25.9% is 180.2% higher than the 9.2% industry average. The stock has gained more than 10% over the past month to close the last trading session at $11.54.
BOSSY’s POWR Ratings reflect this promising outlook. It has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has an A grade for Growth and Quality and a B for Value. Click here to see the additional ratings for BOSSY’s Value, Sentiment, Momentum, and Stability. BOSSY is ranked #2 of 68 stocks in the B-rated Fashion & Luxury industry.
DLH Holdings Corp. (DLHC)
DLHC is a full-service provider of technology-enabled health and human services that focuses on providing solutions in Defense and Veterans Health Solutions, Human Solutions and Services, and Public Health and Life Sciences market areas. It primarily serves the federal health services market.
On June 2, 2022, DLHC won a contract to provide statistical analysis, research support, software programming, and data visualization for NIEHS’ (National Institute of Environmental Health Sciences) Division of National Toxicology Program (DNTP) and Division of Intramural Research (DIR) in areas of carcinogenesis, neurotoxicity, immunotoxicity, toxicology, and biology, for approximately $13 million.
On July 11, 2022, DLHC’s Social & Scientific Systems, Inc. subsidiary was awarded an Indefinite Delivery/Indefinite Quantity (ID/IQ) contract to provide support to the National Cancer Institute’s (NCI) Division of Cancer Epidemiology and Genetics (DCEG). Social & Scientific Systems, Inc. will manage multidisciplinary domestic and international studies with diverse study designs of varying sizes and complexities.
This will help DLHC expand its partnership with DCEG in the long run and help discover the genetic and environmental determinants of cancer and find new approaches to preventing the disease.
DLHC’s revenue for its fiscal 2022 second quarter ended March 31, 2022, increased 76.7% year-over-year to $108.70 million. The company’s income from operations came in at $10.25 million, indicating a 121.9% rise from the prior-year period.
DLHC’s net income came in at $7.18 million for the quarter, up 179.6% from the year-ago period. Its EPS rose 163.2% year-over-year to $0.50. As of March 31, 2022, the company had $359 million in cash.
Analysts expect the company’s EPS to hit $1.52 for its fiscal 2022 ending September 30, 2022, representing a 29.4% rise from the prior-year period. It surpassed Street EPS estimates in three of the trailing four quarters.
The consensus revenue estimate of $395.50 million for the same fiscal year represents a 60.7% year-over-year improvement. DLHC’s EPS is expected to grow at a rate of 15.5% per annum over the next five years.
The company’s EBITDA has grown 70.2% over the past year, 244.7% above the industry average of 20.4%. Its 102.2% ROE growth is 423.6% higher than the 19.5% industry average. Over the past month, the stock has gained 6.9% to close the last trading session at $15.76.
DLHC’s POWR Ratings reflect its solid prospects. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system. It has an A grade for Growth, Value, and Sentiment and a B for Quality.
In addition to the POWR Ratings grades we have just highlighted, one can see DLHC’s Momentum and Stability ratings here. DLHC is ranked #2 of 85 stocks in the B-rated Industrial - Services industry.
Genuine Parts Company (GPC)
GPC distributes automotive replacement parts, industrial parts, and materials for hybrid and electric vehicles, trucks, SUVs, buses, motorcycles, farm vehicles, small engines, farm equipment, and heavy-duty equipment.
It provides gearbox and fluid power and process pump assembly and repair, hydraulic drive shaft repair, electrical panel assembly and repair, hose and gasket manufacture and assembly, and other value-added services.
On April 13, 2022, GPC’s London-based automotive distribution company Alliance Automotive Group (AAG) acquired Lausan Group, a leading distributor of automotive aftermarket parts in Spain and Portugal.
The acquisition will help GPC expand its European automotive footprint and strengthen Lausan’s market-leading position by capitalizing on GPC’s European scale, purchasing expertise, and leveraging the roll-out of its NAPA brand across the region. It expects Lausan to generate annual revenue of approximately $125 million.
GPC’s net sales for its fiscal 2022 first quarter ended March 31, 2022, increased 18.6% year-over-year to $5.29 billion. The company’s gross profit came in at $1.83 billion, representing an 18.5% year-over-year improvement. Its pre-tax income came in at $325.72 million for the quarter, up 13.9% from the prior-year period.
While GPC’s adjusted net income increased 22% year-over-year to $265.65 million, its adjusted EPS grew 24% to $1.86. It had $610.78 million in cash and cash equivalents as of March 31, 2022.
The consensus EPS estimate of $7.83 for fiscal 2022 ending December 31, 2022, indicates a 13.3% year-over-year improvement. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive.
Analysts expect the stock’s revenue to be $21.17 billion for the same fiscal year, representing a 12.2% rise from the prior-year period. Its EPS is expected to grow at 4.6% per annum over the next five years.
The company’s ROE has grown 248.7% over the past year, 1294.2% above the industry average of 17.8%. Over the past month, the stock has gained 6.8% to close the last trading session at $141.79.
GPC’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
It has an A grade for Growth and a B for Stability, Sentiment, and Quality. Click here to see the additional ratings for GPC’s Momentum and Value. GPC is ranked #3 of 68 stocks in the A-rated Auto Parts industry.
Valhi, Inc. (VHI)
VHI engages in the chemicals, component products, and real estate management and development businesses internationally. It offers titanium dioxide pigments and metals products, ergonomic computer support systems, and precision ball bearing slides, as well as owns and operates a facility for the processing, treating, and disposing of hazardous wastes.
For its fiscal year 2022 first quarter ended March 31, 2022, VHI’s total net sales increased 23.6% year-over-year to $629 million. The company’s total operating income came in at $100.70 million, representing a 96.3% rise from its year-ago period.
While its net income increased 158.8% year-over-year to $63.40 million, its EPS grew 205.8% to $1.59. It had $640 million in cash and cash equivalents as of March 31, 2022.
Analysts expect VHI’s EPS to be $9.57 for fiscal 2022 ending December 31, 2022, representing a 114.6% rise from the prior-year period. The consensus revenue estimate of $2.66 billion for fiscal 2022 ending December 31, 2022, indicates a 15.9% year-over-year improvement. Its EPS is expected to grow at 25.5% per annum over the next five years.
The company’s EBITDA has grown 99.5% over the past year, 258.4% above the industry average of 27.8%. Its 194.4% ROE growth is 730% higher than the 23.4% industry average. Over the past month, the stock has gained 10.9% to close the last trading session at $48.07.
VHI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
It has an A grade for Value, Growth, and Sentiment and a B for Quality. Click here to see the additional ratings for VHI (Stability and Momentum). VHI is ranked #1 of 89 stocks in the A-rated Chemicals industry.
Merck & Co., Inc. (MRK)
MRK offers health solutions through prescription medicines, vaccines, biological therapies, and consumer care products through its Pharmaceutical; and Animal Health segments. Its products are marketed directly and through joint ventures to drug wholesalers and retailers, hospitals, government agencies, and managed health care providers.
On July 13, 2022, MRK’s Merck Sharp & Dohme LLC subsidiary and Orion Corporation, a Finland-based manufacturer of human and veterinary pharmaceuticals, announced a global development and commercialization agreement for Orion’s investigational candidate ODM-208 and other drugs targeting cytochrome P450 11A1 (CYP11A1), an enzyme important in steroid production.
The development of ODM-208, currently being evaluated in Phase 2 clinical trial for the treatment of patients with metastatic castration-resistant prostate cancer (mCRPC), will help the companies witness widespread recognition across the industry.
For its fiscal 2022 first quarter ended March 31, 2022, MRK’s sales grew 49.6% year-over-year to $15.90 billion. The company’s non-GAAP pre-tax income came in at $6.31 billion, indicating a 52.1% rise from the year-ago period.
Its non-GAAP net income came in at $5.43 billion, up 84.2% from the prior-year period. MRK’s adjusted EPS increased 84.5% year-over-year to $2.14. As of March 31, 2022, the company had $1.30 billion in cash and cash equivalents.
The consensus EPS estimate of $7.35 for fiscal 2022 ending December 31, 2022, represents a 22.1% rise from the prior-year period. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive.
Analysts expect MRK’s revenue to be $58.06 billion for the same fiscal year, indicating a 19.2% year-over-year improvement. The company’s EPS is expected to grow at a 10.4% rate per annum over the next five years.
The company’s EBITDA has grown 52% over the past year, 258.1% above the industry average of 14.5%. Its 127.2% ROE growth is 9548.1% higher than the 1.3% industry average. Over the past month, the stock has gained 8.2% to close the last trading session at $92.36.
MRK’s POWR Ratings reflect its solid prospects. It has an overall A rating, which equates to Strong Buy in our proprietary rating system. The stock has an A grade for Growth and a B grade for Value, Stability, Sentiment, and Quality.
In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for MRK’s Momentum here. MRK is ranked #1 of 168 stocks in the Medical - Pharmaceuticals industry.
BOSSY shares were trading at $11.48 per share on Wednesday afternoon, down $0.06 (-0.52%). Year-to-date, BOSSY has declined -3.16%, versus a -16.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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