4 Growth Stocks You May Want to Start a Position in
This year, geopolitical turmoil, sky-high inflation, and aggressive interest rate hikes have affected the stock market. This resulted in decreased investor confidence and massive stock selloffs.
However, after the inflation had shown signs of cooling, which ultimately led to an indication of agreement among the Fed officials about slowing interest rate hikes soon, investor sentiments have uplifted. Additionally, Fed Chair Jerome Powell has confirmed that smaller interest rate increases are likely ahead.
Over the past month, the S&P 500 grew 5.4%, and the Dow Jones Industrial Average rose 5.7%. Moreover, veteran strategist Ed Yardeni expects the stock market to surge another 8% before year-end as the economy proves more resilient than expected.
With growing optimism among investors, growth stocks General Motors Company (GM), Rambus Inc. (RMBS), MaxLinear, Inc. (MXL), and Celestica Inc. (CLS) could be wise additions to the portfolio now, given their strong fundamentals.
General Motors Company (GM)
GM designs, builds, and sells trucks, crossovers, cars, automobile parts, and accessories in several parts of the world. Its segments are GM North America; GM International; Cruise; and GM Financial.
On November 17, GM and Vale Canada Limited, a subsidiary of Vale S.A. (VALE), announced the signing of a term sheet for the long-term supply of battery-grade nickel sulfate from VALE’s proposed plant at Bécancour, Québec. Securing the supply of the material is expected to support GM’s EV production needs in North America.
On October 24, GM declared a $0.09 per share cash dividend for the fourth quarter of 2022, payable to common stockholders on Thursday, December 15, 2022. This reflects the shareholder return ability of the company.
Over the past three years, GM’s revenue and EBIT have grown at 0.6% and 13.3% CAGRs, respectively. GM’s revenue came in at $41.89 billion for the third quarter ended September 30, up 56.4% year-over-year. Its adjusted EBIT came in at $4.29 billion, up 46.7% from the prior-year period. In addition, its adjusted EPS came in at $2.25, up 48% year-over-year.
Analysts expect GM’s EPS for the fiscal fourth quarter (ending December 2022) to increase 23.7% year-over-year to $1.67. Its revenue is expected to increase 21.6% year-over-year to $40.84 billion in the same quarter. Additionally, GM has surpassed EPS estimates in three of the four trailing quarters, which is impressive.
GM has gained 4.9% over the past six months to close the last trading session at $40.56. Moreover, it has gained 2% intraday.
GM’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
GM has an A grade for Growth and a B for Value and Sentiment. Within the Auto & Vehicle Manufacturers industry, GM is ranked #20 out of 62 stocks. Click here for the additional POWR Ratings for GM (Momentum, Stability, and Quality).
Rambus Inc. (RMBS)
RMBS offers semiconductor products internationally. The company provides DDR memory interface chips to module manufacturers and OEMs, silicon IP that protects data in advanced applications, and physical interface and digital controller IP to offer industry-leading, integrated memory and interconnect subsystems.
On October 31, RMBS announced the extension of its comprehensive patent license agreement with popular semiconductor technology firm Samsung Electronics for an additional ten years.
“This extension enables deeper collaboration to deliver even greater value to the industry, and we are excited to continue working with such an innovative industry leader,” said Luc Seraphin, President, and CEO of RMBS.
On October 24, RMBS announced the availability of its PCI Express® (PCIe®) 6.0 Interface Subsystem comprised of PHY and controller IP. This should bolster the company’s revenue stream.
RMBS’ revenue has grown at 22.2% CAGR over the past three years and a 1.8% CAGR over the past five years.
For the fiscal third quarter that ended September 30, RMBS’ total revenue increased 38.1% year-over-year to $112.24 million. Non-GAAP operating income came in at $34 million, up 78.9% from the prior-year quarter. Its net cash provided by operating activities increased 73.9% year-over-year to $80 million in the same period.
The consensus EPS and revenue estimates of $0.17 and $151.94 million for the fiscal fourth quarter ending December 2022 indicate a growth of 247.7% and 21.1% year-over-year, respectively.
RMBS’ shares have gained 52.9% over the past six months and 27.3% over the past month to close its last trading session at $38.38.
The company’s promising prospect is reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system. RMBS has a Growth grade of A and a Sentiment and Quality grade of B. It is ranked #16 among the 93 stocks in the Semiconductor & Wireless Chip industry.
In addition to the POWR Rating grades we’ve stated above, one can see RMBS ratings for Value, Momentum, and Stability here.
MaxLinear, Inc. (MXL)
MXL provides radiofrequency, high-performance analog, and mixed-signal communications systems-on-chip solutions (SOCs) for the connected home, wired and wireless infrastructure, and industrial and multi-market applications.
On November 15, MXL announced a collaboration with Edimax to bring a compact 2.5G high-speed 5 port switch solution to the home and small & medium business (SMB) markets.
James Lougheed, Vice President of Marketing, High Performance Analog, said, “With the proliferation of 2.5GbE in home gateways and desktops as well as the move to Wi-Fi 6E and in the future to Wi-Fi 7, products such as the Edimax switch are in demand.”
On October 18, MXL announced the seventh generation of its Wi-Fi SoC solution for service provider gateways, Wi-Fi routers, and access points. The chips are currently sampling to selected partners, and MXL-enabled products are expected in 2023. This should boost the company’s top line.
MXL’s revenue has grown at 47.7% and 22.3% CAGRs over the past three and five years, respectively. Moreover, its EBITDA has grown at a 152.2% CAGR over the past three years.
MXL’s net revenue came in at $285.73 million for the third quarter ended September 30, 2022, up 24.4% year-over-year. Its non-GAAP net income came in at $84.07 million, up 40.3% year-over-year. In addition, its non-GAAP EPS came in at $1.05, representing an increase of 40% year-over-year.
MXL’s revenue is expected to increase 17% year-over-year to $290.04 million for the fourth quarter ending December 2022. Its EPS is estimated to increase 23.7% year over year to $1.06 in the same quarter. Additionally, MXL has surpassed EPS and revenue estimates in all four trailing quarters, which is impressive.
MXL’s stock has gained 18.5% over the past month to close the last trading session at $36.60. Moreover, the stock has gained 7% intraday.
It’s no surprise that MXL has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Growth and a B for Quality and Value. It is ranked #10 in the Semiconductor & Wireless Chip industry.
We’ve also rated MXL for Momentum, Sentiment, and Stability. Get all the MXL ratings here.
Celestica Inc. (CLS)
CLS is a hardware platform and supply chain solutions provider. It operates through two segments: Advanced Technology Solutions and Connectivity & Cloud Solutions. The company is headquartered in Toronto, Canada.
On October 18, 2022, CLS launched the DS1000 high-performance Gigabit Ethernet Layer 3 switch. This should benefit the company through its contribution to the OCP Enterprise Connectivity Solutions (ECS) group.
CLS’ revenue has grown at 3.1% and 1.6% CAGRs over the past three and five years, respectively. Moreover, its EBITDA has grown at 13.9% CAGR over the past three years.
In the fiscal third quarter ended September 30, 2022, CLS’ IFRS revenue increased 31.1% year-over-year to $1.92 billion. For the same quarter, non-IFRS adjusted net earnings came in at $63.60 million, while its non-IFRS adjusted earnings per share stood at $0.52, up 46.5% and 48.6% from its year-ago value, respectively.
For the fiscal fourth quarter ending December 2022, analysts expect CLS’ revenue to come in at $1.96 billion, representing an increase of 29.7% year-over-year. For the same quarter, the consensus EPS estimate of $0.54 indicates a 21.9% year-over-year increase. The company has surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.
The stock has gained 8.1% over the past three months and 2.9% intraday to close its last trading session at $11.16.
CLS’ overall A rating translates to a Strong Buy in our proprietary rating system. The stock has also rated an A for Value and Growth and a B for Momentum and Sentiment. Within the Technology – Services industry, it is ranked second out of 77 stocks.
In addition to the POWR Rating grades stated above, one can see the additional CLS grades for Quality and Stability here.
GM shares were trading at $40.80 per share on Thursday afternoon, up $0.24 (+0.59%). Year-to-date, GM has declined -30.25%, versus a -13.35% rise in the benchmark S&P 500 index during the same period.