Although inflation remains above the Fed’s target of 2%, there are signs of the high prices easing. While the Fed continues to fight inflation with interest rate hikes, investors should focus on their long-term strategies and invest in fundamentally strong growth stocks ASML Holding N.V. (ASML), SAP SE (SAP), Chipotle Mexican Grill, Inc. (CMG), and Sysco Corporation (SYY) which look poised to deliver steady returns over the next five years.
The Fed closely tracks the personal consumption expenditures price index as a key indicator of inflation. The PCE in February, excluding food and energy, increased 0.3% for the month, slightly less than anticipated, and increased 4.6% on a 12-month basis.
The nonfarm payrolls grew by 236,000 in March, coming lower than estimates, while the unemployment rate came slightly lower than expectations at 3.5%.
Although job growth was just about in line with expectations, the jobs market remains tight. Despite the bank failures, the Fed went ahead with its ninth consecutive rate hike last month.
The Fed remains determined to bring down inflation and will likely keep raising interest rates this year. Moreover, the bank failures are expected to bring tighter lending standards.
These factors are expected to push the economy into a recession. Amid the uncertainty, investing in quality growth stocks for the long term could help generate solid returns. Investors’ interest in growth stocks is evident from the Vanguard Growth ETF’s (VUG) 16.1% returns year-to-date.
ASML Holding N.V. (ASML)
Headquartered in Veldhoven, the Netherlands, ASML develops, produces, markets, sells, and services advanced semiconductor equipment systems consisting of lithography, metrology, and inspection systems for memory and logic chipmakers.
ASML’s revenue grew at a CAGR of 21.5% over the past three years. Its EBITDA grew at a CAGR of 29.3% over the past three years. Moreover, its EPS grew at a CAGR of 32% during the same time frame.
ASML’s net sales for the fourth quarter ended December 31. 2022, increased 29% year-over-year to €6.43 billion ($7 billion). Its gross profit increased 22.6% over the prior-year quarter to €3.31 billion ($3.61 billion). Its net income rose 2.4% year-over-year to €1.82 billion ($1.98 billion). Moreover, its EPS came in at €4.60, representing an increase of 5% year-over-year.
ASML’s EPS and revenue for the quarter ended March 31, 2023, are expected to increase 138.6% and 78.8% year-over-year to $4.48 and $6.85 billion, respectively. It has a commendable earnings surprise history, surpassing its consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 53.2% to close the last trading session at $657.12.
ASML’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #18 out of 91 stocks in the B-rated Semiconductor & Wireless Chip industry. In addition, it has an A grade for Momentum and Quality and a B for Growth and Sentiment. We have also given ASML grades for Value and Stability. Get all the ASML ratings here.
SAP SE (SAP)
Headquartered in Walldorf, Germany, SAP provides enterprise application software products worldwide. The company operates through Applications, Technology & Services; Qualtrics; Business Network; and Sustainability segments.
On March 13, 2023, SAP announced that it had agreed to sell its 423 million shares of Qualtrics International Inc. for $7.70 billion to Silver Lake and Canada Pension Plan Investment Board (CPP Investments). The sale aligns with SAP’s strategy to streamline its portfolio and focus on its core cloud growth and profitability.
On March 8, 2023, SAP announced key data innovations and partnerships with industry-leading data and AI companies – Collibra NV, Confluent Inc., Databricks Inc., and DataRobot Inc. – that give customers access to mission-critical data, enabling faster time to insights and better business decision-making.
SAP’s Chief Technology Officer and member of the Executive Board, Juergen Mueller, said, “We want to help our customers take the next step to easily and confidently integrate SAP data with non-SAP data from third-party applications and platforms, unlocking entirely new insights and knowledge to bring digital transformation to another level.”
SAP’s revenue grew at a CAGR of 3.9% over the past three years. Its total assets grew at a CAGR of 6.2% over the past three years. Moreover, its levered FCF margin grew at a CAGR of 12.6% during the same time frame.
For the fiscal fourth quarter that ended December 31, 2022, SAP’s total revenue increased 5.7% year-over-year to €8.44 billion ($9.20 billion). The company’s operating profit increased 16.7% year-over-year to €1.71 billion ($1.86 billion). Additionally, its EPS came in at €0.47.
Street expects SAP’s EPS and revenue for the quarter ended March 31, 2023, to increase 15% and 7.9% year-over-year to $1.24 and $8.24 billion, respectively. Over the past six months, the stock has gained 49% to close the last trading session at $128.71.
SAP’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
It is ranked #12 out of 135 stocks in the Software - Application industry. The stock has a B grade for Stability and Quality. Click here to see the additional ratings of SAP for Growth, Value, Momentum, and Sentiment.
Chipotle Mexican Grill, Inc. (CMG)
CMG owns and operates Chipotle Mexican Grill restaurants. It offers burritos, burrito bowls, quesadillas, tacos, and salads.
CMG’s revenue grew at a CAGR of 15.6% over the past three years. Its EBITDA grew at a CAGR of 28.5% over the past three years. Moreover, its EPS grew at a CAGR of 37.3% during the same time frame.
For the fiscal fourth quarter that ended December 31, 2022, CMG’s total revenue increased 11.2% year-over-year to $2.18 billion. The company’s income from operations increased 87.2% year-over-year to $296.33 million. Its net income increased 67.6% year-over-year to $223.73 million. In addition, its EPS came in at $8.02, representing an increase of 71% year-over-year.
CMG’s EPS and revenue for the quarter ended March 31, 2023, are expected to increase 55.8% and 15.7% year-over-year to $8.88 and $2.34 billion, respectively. It has an impressive earnings surprise history, surpassing its consensus EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 25.5% to close the last trading session at $1,685.21.
CMG’s POWR Ratings reflect its positive outlook. It has an overall rating of B, which equates to a Buy.
It is ranked #16 out of 46 stocks in the A-rated Restaurants industry. In addition, it has a B grade for Growth and Quality. Click here to see the other ratings of CMG for Value, Momentum, Stability, and Sentiment.
Sysco Corporation (SYY)
SYY engages in the marketing and distribution of various food and related products, primarily to the foodservice or food-away-from-home industry worldwide. It operates through U.S. Foodservice Operations, International Foodservice Operations, SYGMA, and Other segments.
SYY’s revenue grew at a CAGR of 6.8% over the past three years. Its EBITDA grew at a CAGR of 2.2% over the past three years. Moreover, its EBIT grew at a CAGR of 2.2% during the same time frame.
SYY’s non-GAAP operating income for the second quarter ended December 31, 2022, increased 37.6% year-over-year to $682.10 million. The company’s non-GAAP net earnings increased 39.7% year-over-year to $407.90 million. Its adjusted EBITDA increased 23.9% year-over-year to $831.30 million. Also, its non-GAAP EPS increased 40.4% from the prior-year period to $0.80.
Analysts expect SYY’s EPS and revenue for the quarter ended March 31, 2023, to increase 30.3% and 9.6% year-over-year to $0.93 and $18.52 billion, respectively. Over the past six months, the stock has gained 5.5% to close the last trading session at $77.27.
SYY’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
Within the B-rated Food Makers industry, it is ranked #5 out of 82 stocks. It has a B grade for Growth, Value, and Stability. To see the additional ratings of SYY for Momentum, Sentiment, and Quality, click here.
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ASML shares were trading at $653.01 per share on Monday morning, down $4.11 (-0.63%). Year-to-date, ASML has gained 19.73%, versus a 6.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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