The major market indexes started the year on a somber note as they witnessed severe volatility due to surging inflation and the potential for aggressive interest rate hikes. Later, the commencement of the Russia-Ukraine war added to the downside. Although rising crude oil prices and supply disruptions have dampened investor sentiment, the markets seem to have absorbed most of the negatives. Furthermore, with peace talks between Ukraine and Russia progressing, the worst may be over for the markets. Since March 14, 2022, the Dow Jones Industrial Average has jumped 4.6%, while the S&P 500 and Nasdaq Composite have gained 6.4% and 8.8%, respectively.
Experts believe that the economy will continue its steady recovery this year driven by improved corporate earnings. This bodes well for growth stocks. Evercore ISI’s head of equities, derivatives and quantitative strategy, Julian Emanuel, said “I think the Fed has set the stage for investors to focus on earnings again. Bottom-line earnings estimates since the beginning of the year have risen.” Also, investors' interest in growth stocks is evident in the SPDR Portfolio S&P 500 Growth ETF's (SPYG) 16.3% returns over the past year.
So, if one believes the worst is over for the stock market, it could be wise to add quality growth stocks Autodesk, Inc. (ADSK), ON Semiconductor Corporation (ON), Gartner, Inc. (IT), and Kulicke and Soffa Industries, Inc. (KLIC) to one’s portfolio. These companies’ solid growth attributes should help their stocks soar as the economy recovers.
Autodesk, Inc. (ADSK)
ADSK is a three-dimensional (3D) design, engineering, and entertainment software and service provider that is headquartered in San Rafael, Calif. It serves the architecture, engineering and construction, product design and manufacturing, and digital media and entertainment industries. Its products include AutoCAD Civil 3D, architecture, engineering and construction collection, Autodesk Build, Revit, AutoCAD, AutoCAD LT, Fusion 360, Inventor, Vault, Maya, etc.
On Dec.16, 2021, ADSK announced that it was acquiring a cloud-based estimating solution, ProEst, that enables construction teams to create estimates, perform digital takeoffs, generate detailed reports and proposals, and manage bid-day processes. ADSK plans to integrate ProEst with Autodesk Construction Cloud. The acquisition will strengthen Autodesk Construction Cloud’s preconstruction offerings and empower construction teams to manage all their critical preconstruction and construction workflows on one platform.
ADSK’s net revenues increased 16.5% year-over-year to $1.21 billion for the fourth quarter, ended Jan. 31, 2022. The company’s non-GAAP income from operations increased 34% year-over-year to $421.60 million. Also, its non-GAAP EPS came in at $1.50, representing a 27.1% increase year-over-year.
ADSK’s revenue has grown at a 19.5% CAGR over the past three years. The company’s EBITDA has grown at a 94.2% CAGR over the past three years.
Analysts expect ADSK’s EPS for the quarter ending July 31, 2022, to increase 33.9% year-over-year to $1.62. Its revenue for its fiscal year 2023 is expected to increase 16% year-over-year to $5.09 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past month, the stock has declined 0.8% in price to close the last trading session at $207.34.
ADSK’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has an A grade for Quality. It is ranked #30 of 163 stocks in the Software – Application industry. Click here to see the other ratings of ADSK for Growth, Value, Momentum, Stability, and Sentiment.
Click here to check out our Software Industry Report for 2022
ON Semiconductor Corporation (ON)
ON offers a portfolio of sensors, power management, connectivity, custom and system on chip (SoC), analog, logic, timing, and discrete devices. The Phoenix, Ariz., company’s segments include Power Solutions Group; Analog Solutions Group; and Image Sensor Group.
On Nov. 1, 2021, ON announced that it had completed the acquisition of silicon carbide (SiC) producer GT Advanced Technologies (GTAT). The acquisition bolsters ON’s ability to secure and grow the supply of SiC. President and CEO of ON, Hassane El-Khoury, said, “By integrating GTAT, ON can now provide end-to-end power solutions from SiC crystal growth to fully integrated intelligent power modules.”
For its fiscal fourth quarter, ended Dec. 31, 2021, ON’s revenue increased 27.6% year-over-year to $1.84 billion. The company’s non-GAAP net income increased 224.9% year-over-year to $478 million. Also, its non-GAAP EPS came in at $1.09, representing a 211.4% year-over-year increase.
ON’s revenue has grown at a 4.6% CAGR over the past three years. The company’s EBITDA has grown at a 13.1% CAGR over the past three years.
For the quarter ended March 31, 2022, ON’s EPS and revenue are expected to increase 197.1% and 28.3%, respectively, year-over-year to $1.04 and $1.90 billion. It surpassed consensus EPS estimates in each of the trailing four quarters. And over the past nine months, the stock has gained 63.6% in price to close the last trading session at $60.39.
ON’s POWR Ratings reflect solid prospects. The company has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Growth. Within the A-rated Semiconductor & Wireless Chip industry, it is ranked #32 of 97 stocks. To see the additional ratings of ON for Value, Momentum, Stability, Sentiment, and Quality, click here.
Click here to checkout our Semiconductor Industry Report for 2022
Gartner, Inc. (IT)
IT is a research and advisory company based in Stamford, Conn., that provides an advisory and objective resource for more than 14,000 organizations. It creates and distributes its research content through published reports, interactive tools, facilitated peer networking, briefings, consulting, and advisory services.
IT’s revenues increased 17.3% year-over-year to $1.30 billion for the fourth quarter ended Dec. 31, 2021. The company’s adjusted EBITDA increased 25.3% year-over-year to $307 million. And its adjusted EPS came in at $2.99, representing an 88% increase year-over-year.
IT’s revenue has grown at a 6% CAGR of 6% over the past three years, and its EBITDA has grown at a 23.5% CAGR over the past three years.
Analysts expect IT’s EPS and revenue for its fiscal year 2023 to increase 18% and 12.8%, respectively, year-over-year to $8.46 and $5.95 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. And over the past year, the stock has gained 59.3% in price to close the last trading session at $289.48.
IT’s strong fundamentals are reflected in its POWR ratings. The company has an overall B rating, which translates to a Buy in our proprietary rating system.
It has an A grade for Quality and a B grade for Sentiment. It is ranked #3 of 11 stocks in the A-rated Outsourcing – Tech Services industry. Click here to see the other IT ratings for Growth, Value, Momentum, and Stability.
Kulicke and Soffa Industries, Inc. (KLIC)
Headquartered in Singapore, KLIC designs, manufactures, and sells capital equipment and tools to assemble semiconductor devices, including integrated circuits, high and low powered discrete devices, light-emitting diodes, and power modules. The company operates through the Capital Equipment and Aftermarket Products and Services segments.
On Feb. 1, 2022, KLIC announced that it was expanding its Thermal Compression Bonding (TCB) capabilities to accelerate innovation in semiconductor and Silicon Photonics integration. KLIC’s Executive VP of Products & Solutions, Chan Pin Chong, said, “We are privileged to be selected as the pioneer solution for co-packaged development utilizing thermal compression bonding, with formic acid, which directly addresses these critical process challenges and is expected to accelerate the adoption of emerging Silicon Photonics applications.”
For its fiscal first quarter, ended Jan. 1, 2022, KLIC’s net revenue increased 72.1% year-over-year to $460.88 million. The company’s non-GAAP net income increased 158.5% year-over-year to $138.81 million. Also, its non-GAAP EPS came in at $2.19, representing a 154.7% increase year-over-year.
KLIC’s EBITDA growth was 345.4% year-over-year. Its levered free cash flow has grown at a 36.3% CAGR over the past three years. Its EBITDA has grown at a 48.7% CAGR over the past three years.
For the quarter ending March 31, 2022, KLIC’s EPS is expected to increase 16.7% year-over-year to $1.47. Its revenue for its fiscal year 2022 is expected to increase 5% year-over-year to $1.59 billion. It surpassed consensus EPS estimates in each of the trailing four quarters. And over the past year, the stock has gained 26.2% in price to close the last trading session at $58.98.
KLIC’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
It has a B grade for Value, Momentum, and Quality. Within the Semiconductor & Wireless Chip industry, it is ranked #25. To see the other ratings of KLIC for Growth, Stability, and Sentiment, click here.
Note that KLIC is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.
What To Do Next?
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ADSK shares were unchanged in premarket trading Thursday. Year-to-date, ADSK has declined -26.26%, versus a -6.27% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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