The stock market has been extremely volatile over the past few months amid concerns about the Federal Reserve’s interest rate increases, lingering supply chain disruptions, and a potential economic slowdown. However, the core personal consumption expenditures price index grew 4.9% year-over-year in April, down from 5.2% reported in March. The May inflation data report is expected to be a catalyst for the market because some economists believe that the latest CPI level might be slightly lower than April, and if so could confirm that inflation has peaked.
"The growth engine of the U.S. economy is still alive and kicking, and that's important. Growth estimates for (the second quarter) are still good. There is a better tone in the market than we have seen in recent weeks, in terms of inflation possibly peaking here. Maybe we can avoid stagflation," said Joe Quinlan, Head of CIO Market Strategy for Merrill and Bank of America Private Bank. Yesterday, the market indices rallied as the leading growth stocks reported gains. Over the past month, the Nasdaq Composite has gained 3.8%, while S&P 500 has improved by 3.3%.
Given this backdrop, we think it could be wise to add quality growth stocks Visa Inc. (V), Autodesk, Inc. (ADSK), and Eli Lilly and Company (LLY) to one’s portfolio.
Visa Inc. (V)
V in Foster City, Calif., is a leading payments technology company that facilitates digital payments among consumers, merchants, financial institutions, strategic partners, businesses, and government entities. In addition, it provides card products, platforms, and value-added services. The company offers its products and services under the Visa, Visa Electron, Interlink, VPAY, and PLUS brands.
On May 31, V partnered with Fundbox, an embedded working capital platform for small businesses, to strengthen Fundbox's platform with new digital payment capabilities. With this collaboration, Fundbox Flex Visa Debit Card, issued by Pathward, N.A., will be launched. In addition, the companies will work together in the coming months to introduce a range of new payment products, including a Buy Now, Pay Later (BNPL) solution, and a push-to-card transfer option for instant fund disbursement through Visa Direct.
V's net revenues increased 25.5% year-over-year to $7.19 billion in its fiscal second quarter, ended March 31, 2022. The company's non-GAAP net income and non-GAAP earnings per share came in at $3.84 billion and $1.79, respectively, registering an increase of 26.6% and 29.7% year-over-year. In addition, net cash provided by operating activities grew 12.8% from the year-ago value to $7.72 billion.
The company's financials have grown substantially over the past three years. V's revenue and EBITDA have risen at CAGRs of 7.5% and 9.2%, respectively, over the past three years. Its net income grew at a 7.4% CAGR, while EPS has improved at a 9.5% CAGR over the past three years.
The $7.03 billion consensus revenue estimate for its fiscal 2022 third quarter, ending June 2022, represents a 14.7% improvement from the same period in 2021. Analysts expect the company's EPS for the current quarter to come in at $1.73, representing a 16.2% increase year-over-year. It has surpassed both the consensus revenue and EPS estimates in each of the trailing four quarters.
Shares of V have gained 6.5% in price over the past three months and closed yesterday's trading session at $212.94.
V's POWR Ratings reflect this promising outlook. It has an overall B grade, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
V has a grade of B for Sentiment, Growth, and Quality. Within the Consumer Financial Services industry, it is ranked #5 of 49 stocks. To see additional POWR Ratings (Stability, Value, and Momentum) for V, click here.
Autodesk, Inc. (ADSK)
ADSK in San Rafael, Calif., offers 3D design, engineering, and entertainment software and services worldwide. The company's product offerings are focused on four product categories, which are architecture and construction (AEC), AutoCAD and AutoCAD LT, manufacturing (MFG), and media and entertainment (M&E). It serves customers in architecture, engineering, construction, product design, and manufacturing and entertainment industries.
On March 29. ADSK launched Bridge, a collaboration capability that empowers construction teams to share only relevant data with project stakeholders within Autodesk Construction Cloud. The new collaboration capabilities delivered by Bridge lessen the need for manual data transfer and management and provide teams the autonomy and flexibility to manage their data efficiently.
On March 24, ADSK signed a definitive agreement to acquire The Wild, a cloud-connected, extended reality (XR) platform. "Our acquisition of The Wild reflects the rapid transformation taking place in the building industry, from the complexity of projects to the geographic diversity of teams who design, construct, and operate them. XR is a must-have business imperative for today and an important part of Autodesk's Forge platform vision," said Andrew Anagnost, ADSK's CEO and President.
In its fiscal 2023 first quarter, ended April 30, 2022, ADSK's net revenue grew 18.3% year-over-year to $1.17 billion, and its gross profit increased 17.4% year-over-year to $1.05 billion. Its non-GAAP income from operations has improved 41.8% from the year-ago value to $397 million. The company's non-GAAP net income per share amounted to $1.43, up 38.8% year-over-year.
The company has an impressive growth history also because its revenue and EBITDA have improved at CAGRs of 18.5% and 69%, respectively, over the past three years. Its levered free cash flow has increased at a 28.2% CAGR over the past three years.
Analysts expect ADSK's revenue for its fiscal 2023 second quarter, ending July 31, 2022, to come in at $1.22 billion, representing a 15.5% rise from the prior-year period. The Street expects the company's EPS for the current quarter to come in at $1.57, representing a 30% increase year-over-year. The company has topped both the consensus revenue and EPS estimates in each of the trailing four quarters.
Over the past month, the stock has gained 7.7% to close yesterday's trading session at $208.60.
ADSK's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which translates to Buy in our POWR Rating system.
It has a grade of A for Quality and a B for Growth. It is ranked #33 of 156 stocks in the Software - Application industry. Click here to see ADSK's additional POWR Ratings for Momentum, Value, Sentiment, and Stability.
Click here to check out our Software Industry Report for 2022
Eli Lilly and Company (LLY)
LLY is the provider of human pharmaceuticals. The Indianapolis, Ind., company offers Basaglar, Humalog U-100, Humalog U-200, Humalog Mix 50/50, insulin lispro, and Humulin U-500 for diabetes, Alimta for non-small cell lung cancer (NSCLC) and malignant pleural mesothelioma, Cyramza for metastatic gastric cancer, metastatic NSCLC, and hepatocellular carcinoma, and Verzenio for HR+, HER2- metastatic breast cancer, and early breast cancer.
On May 25, LLY invested $2.1 billion in two new manufacturing sites at Indiana's LEAP Lebanon Innovation and Research District in Boone County to expand its manufacturing footprint in Indiana. "These new sites will add capacity in support of our growing pipeline of innovative medicines, while also creating more high-tech jobs for Hoosiers," said David A. Ricks, LLY's chair and CEO.
On May 14, LLY announced that the U.S. Food and Drug Administration (FDA) approved Mounjaro (tirzepatide) injection, the first and only GIP and GIP-1 receptor agonist for treating patients with type 2 diabetes.
LLY's revenue increased 14.8% year-over-year to $7.81 billion in the fiscal 2022 first quarter ended March 31, 2022. Its non-GAAP operating income grew 66% year-over-year to $2.61 billion. Also, the company's non-GAAP net income and non-GAAP earnings per share came in at $2.37 billion and $2.62, respectively, registering an increase of 61.9% and 62.7% year-over-year.
The company's financials have grown substantially over the past three years. LLY's revenue and EBITDA have grown at CAGRs of 10.7% and 13.1%, respectively, over the past three years. Its levered free cash flow has improved at a 19.3% CAGR over the past three years.
The $30.31 billion consensus revenue estimate for its fiscal year 2023, ending Dec. 31, 2023, represents a 4.4% improvement from the previous year. It has surpassed the consensus revenue estimates in each of the trailing four quarters. Also, analysts expect the company's EPS for the next year to come in at $9.41, representing a 12.6% increase year-over-year.
The stock has improved 24.1% in price over the past six months and 52.3% over the past year and closed yesterday's trading session at $303.36. Its year-to-date gain translates to 10.7%.
LLY's POWR Ratings reflect a strong outlook. The stock has an overall A rating, which translates to Strong Buy in our POWR Ratings system.
LLY has a B grade for Stability, Sentiment, Quality, and Growth. It is ranked #12 of 165 stocks in the Medical -Pharmaceuticals industry. Click here to see LLY's POWR Ratings for Value and Momentum.
Click here to checkout our Healthcare Sector Report for 2022
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 +48.22% a year.
Click below now to see these top performing stocks with exciting growth prospects:
V shares were trading at $214.07 per share on Tuesday afternoon, up $1.13 (+0.53%). Year-to-date, V has declined -0.87%, versus a -12.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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