Concerns over record-high inflation, ongoing geopolitical issues, and the Federal Reserve’s signal that it will hike interest rates four to five times this year have caused the stock market to suffer frequent sell-offs this month, with major benchmark indexes struggling to regain strength. Therefore, we think investors looking to dodge these short-term fluctuations could bet on stocks that are well-positioned to capitalize on the economy’s growth in the long run.
Along with a bipartisan infrastructure bill, impressive fourth-quarter U.S. GDP growth paints a bright economic outlook. So, growth-focused companies should benefit significantly eventually. Investors’ interest in growth stocks is evident in the iShares Russell Top 200 Growth ETF’s (IWY) 7.9% returns over the past nine months versus the SPDR S&P 500 Trust ETF’s (SPY) 5.9% gains.
West Pharmaceutical Services, Inc. (WST), Ulta Beauty, Inc. (ULTA), Houlihan Lokey, Inc. (HLI), Asbury Automotive Group, Inc. (ABG), and United Natural Foods, Inc. (UNFI) possess solid growth attributes. So, it could be wise to bet on these stocks now.
West Pharmaceutical Services, Inc. (WST)
WST, in Exton, Pa., designs and produces containment and delivery systems for injectable drugs and healthcare products and serves pharmaceutical, diagnostic, and medical device companies worldwide. The company operates through two segments: Proprietary Products and Contract-Manufactured Products. It distributes its products through its sales force and distribution network, contract sales agents, and regional distributors.
On Jan.25, 2022, WST and Corning Incorporated (GLW), a multinational technology company that specializes in materials science, announced an exclusive supply and technology agreement to expand GLW’s Valor Glass technology to enable advanced injectable drug packaging and delivery systems for the pharmaceutical industry. This collaboration enables both companies to optimize their materials science and manufacturing expertise to help bio-pharma producers navigate the complex regulatory environment and mitigate risk in bringing drugs to market.
WST’s net sales for its fiscal 2021 third quarter, ended Sept. 30, 2021, increased 28.9% year-over-year to $706.50 million. The company’s gross profit came in at $288.20 million, representing a 48.1% year-over-year improvement. Its adjusted operating profit was $182.80 million, up 75.9% from the prior-year period. WST’s adjusted net income came in at $156.80 million, indicating a 79.8% rise from its year-ago period. Its adjusted EPS increased 79.1% year-over-year to $2.06. The company had $688 million in cash and cash equivalents as of Sept. 30, 2021.
WST’s net income and EPS have grown at CAGRs of 58.1% and 57.9%, respectively, over the past three years. The $8.49 consensus EPS estimate for its fiscal year 2021, ended Dec. 31, 2021, represents a 15.7% rise from the prior-year period. It surpassed the consensus EPS estimates in each of the trailing four quarters. Analysts expect WST’s revenue to rise 31.4% year-over-year to $2.82 billion. Its EPS is expected to grow at a 27.6% rate per annum over the next five years. Over the past year, the stock has gained 31.5% in price to close Friday’s trading session at $393.03.
It is no surprise that WST has an overall B rating, which equates to Buy in our POWR Ratings 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 Sentiment and a B grade for Growth and Quality. Click here to see the additional ratings for WST’s Value, Stability, and Momentum. WST is ranked #27 of 164 stocks in the Medical - Devices & Equipment industry.
Click here to checkout our Healthcare Sector Report for 2022
Ulta Beauty, Inc. (ULTA)
ULTA is a beauty retailer that sells cosmetics, fragrances, haircare and skincare products, salon services, and related accessories and services. The Bolingbrook, Ill., company distributes its products through its website and mobile applications.
On Nov. 2, 2021, ULTA partnered with DoorDash (DASH), the nation’s leading last-mile logistics platform, to offer same-day delivery from select ULTA stores with plans to expand and roll out more broadly in 2022. ULTA should benefit from the growing demand.
For its fiscal third quarter, ended Oct. 30, 2021, ULTA’s net sales increased 28.6% year-over-year to $2 billion. The company’s gross profit came in at $789.47 million, representing a 44.7% rise from the prior-year period. ULTA’s $284.24 million in operating income for the quarter represents a 180.7% rise from the year-ago period. While its net income increased 187.8% year-over-year to $215.29 billion, its EPS increased 198.5% to $3.94. As of Oct. 30, 2021, the company had $605.05 million in cash and cash equivalents.
ULTA’s net income and EPS have increased at CAGRs of 10% and 13.2%, respectively, over the past three years. Analysts expect the company’s EPS to increase 268.2% year-over-year to $17.16 in its fiscal year 2022, ending Jan. 31, 2022. It surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive. A $8.59 billion consensus revenue estimate for the same fiscal year represents a 39.6% rise from the prior-year period. ULTA’s EPS is expected to grow at a 62% rate per annum over the next five years. Over the past year, the stock has gained 23.4% in price to close Friday’s trading session at $358.83.
ULTA’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. ULTA has an A grade for Quality and a B grade for Sentiment. Click here to see the additional ratings for ULTA’s Value, Momentum, Growth, and Stability. Among the 46 stocks in the Specialty Retailers industry, ULTA is ranked #16.
Houlihan Lokey, Inc. (HLI)
HLI is a Los Angeles-based global investment banking company that offers mergers and acquisitions, financial restructuring, capital markets, strategic consulting, and financial advisory services worldwide. The company serves corporations, financial sponsors, and government agencies.
On Dec. 6, 2021, HLI acquired GCA Corporation (GCA), a multinational investment bank, and will be operating under the Houlihan Lokey banner from now on. This should help the company deliver enhanced and superior services to its clients worldwide.
For its fiscal 2022 second quarter, ended Sept. 30, 2021, HLI’s revenues increased 94.9% year-over-year to $537.27 million. The company’s adjusted operating income came in at $163.52 million, up 127.4% from the prior-year period. Its adjusted net was $117.36 million for the quarter, indicating a 123.7% rise from the year-ago period. Its adjusted EPS increased 128% year-over-year to $1.71. As of Sept. 30, 2021, the company had $923.01 million in cash and cash equivalents.
HLI’s net income and EPS have grown at CAGRs of 35% and 33%, respectively, over the past three years. Analysts expect the company’s EPS to be $6.92 for its fiscal year 2022, ending March 31, 2022, representing a 49.8% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. A$2.18 billion consensus revenue estimate for the same fiscal year indicates a 42.7% year-over-year improvement. HLI’s EPS is expected to grow at an 8.7% rate per annum over the next five years. Over the past year, the stock has gained 54.1% in price and ended Friday’s trading session at $104.33.
HLI’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. It has an A grade for Quality and a B grade for Growth. Click here to see the additional ratings for HLI (Stability, Value, Sentiment, and Momentum). HLI is ranked #2 of 22 stocks in the A-rated Investment Brokerage industry.
Asbury Automotive Group, Inc. (ABG)
ABG is an automotive retailer that operates franchises and dealership locations. The Duluth, Ga. company offers new and used vehicles, finance and insurance products, vehicle maintenance and repair services, replacement parts, and service contracts. It offers dealerships for luxury and mid-line import brands.
On Dec. 17, 2021, ABG completed its acquisitions of Larry H. Miller Dealerships (LHM Dealerships) and Total Care Auto (TCA), Powered by Landcar, from the LHM Group. With the acquisitions, ABG adds 54 new vehicle dealerships, seven used vehicle dealerships, 11 collision centers, a used vehicle wholesale business and an F&I product provider. The acquisitions will add approximately $5.7 billion in annualized revenues and expand ABG’s footprint to high-growth Western markets.
ABG’s total revenue for its fiscal 2021 third quarter, ended September 30, 2021, increased 30.4% year-over-year to $2.41 billion. The company’s total gross profit came in at $480 million, representing a 42.9% rise from the prior-year period. Its adjusted income from operations was t $204.50 million for the quarter, up 68.9% from the prior-year period. While its adjusted net income increased 81.3% year-over-year to $143.60 million, its adjusted EPS grew 80.4% to $7.36. The company had $330.60 million in cash and cash equivalents as of September 30, 2021.
ABG’s net income and EPS have grown at CAGRs of 41.4% and 44.3%, respectively, over the past three years. The $25.79 consensus EPS estimate for its fiscal year 2021, ended Dec. 31, 2021, represents a 99.9% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. For the same fiscal year, analysts expect ABG’s revenue to improve 34.9% from the prior-year period to $9.62 billion. The company’s EPS is expected to grow at an 18.5% rate per annum over the next five years. Over the past year, the stock has gained 6.8% in price and closed Friday’s trading session at $156.90.
ABG’s POWR Ratings reflect its solid prospects. The stock has an A grade for Value and a B grade for Growth. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for ABG’s Sentiment, Quality, Stability, and Momentum here. ABG is ranked #11 of 25 stocks in the B-rated Auto Dealers & Rentals industry.
United Natural Foods, Inc. (UNFI)
UNFI distributes natural, organic, specialty, produce, and conventional grocery and non-food products in the United States and Canada. The Providence, R.I., company offers grocery and general merchandise, produce, perishables and frozen foods, nutritional supplements and sports nutrition, bulk and foodservice products, and personal care items. It serves chains, independent retailers, supernatural chains, foodservice, e-commerce, conventional military business, and other sales customers.
On October 14, 2021, UNFI agreed with DoorDash (DASH), a leading last-mile logistics platform, to bring on-demand grocery delivery solutions to independent retailers nationwide. This will allow local grocers to leverage the DoorDash platform to build an e-commerce and delivery offering that enables UNFI to expand its end-to-end and last-mile-delivery services to its suite of eCommerce solutions for retailers.
UNFI’s net sales for its fiscal 2021 third quarter, ended Oct. 30, 2021, increased 4.7% year-over-year to $7 billion. The company’s gross profit came in at $1.04 billion, representing a 7.4% year-over-year improvement. Its operating income was $107 million, up 114% from the prior-year period. UNFI’s net income came in at $76 million, compared to a $1 million net loss in the prior-year period. Its adjusted EPS increased 90.2% year-over-year to $0.97. As of Oct. 30, 2021, the company had $46 million in cash and cash equivalents.
UNFI’s net income and EPS have increased at CAGRs of 24.9% and 17%, respectively, over the past three years. Analysts expect the company’s EPS to increase 8.8% year-over-year to $4.22 in its fiscal year 2022, ending July 31, 2022. It surpassed the consensus EPS estimates in each of the trailing four quarters. The $28.20 billion consensus revenue estimate for the same fiscal year represents a 4.6% rise from the prior-year period. UNFI’s EPS is expected to grow at a 7.2% rate per annum over the next five years. Over the past year, the stock has gained 20.9% in price to close the last trading session at $202.70.
UNFI’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. UNFI has an A grade for Value and a B grade for Growth. Click here to see the additional ratings for UNFI’s Sentiment, Stability, Quality, and Momentum. Among the 85 stocks in the B-rated Food Makers industry, UNFI is ranked #28.
What To Do Next?
If you would like to see more top growth stocks, then you should check out our free special report:
What makes them "MUST OWN"?
All 9 picks have strong fundamentals and are experiencing tremendous momentum. They also contain a winning blend of growth and value attributes that generates a catalyst for serious outperformance.
Even more important, each recently earned a Buy rating from our coveted POWR Ratings system where the A rated stocks have gained +31.10% a year.
Click below now to see these top performing stocks with exciting growth prospects:
WST shares were trading at $397.07 per share on Monday morning, up $4.04 (+1.03%). Year-to-date, WST has declined -15.30%, versus a -6.27% 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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