Investing in companies with robust growth potential can be a prudent strategy to secure substantial long-term returns at the moment. To that end, Spotify Technology S.A. (SPOT), Pure Storage, Inc. (PSTG), Annaly Capital Management, Inc. (NLY), and Wix.com Ltd. (WIX), which exhibit strong growth, could be great additions to your portfolio now.
Growth stocks offer high potential returns, driven by companies with strong earnings growth. They often outperform in bull markets and can significantly increase an investor's portfolio value. The World Bank raised the global growth rate to 2.6% from 2.4% in January. Such optimism about the global economy’s prospects might lend support to growth names.
Moreover, despite a volatile macroeconomic background, growth stocks outperformed value stocks in 2023, and investors anticipate that trend will continue in 2024 when the Federal Reserve eventually pivots to rate cuts. Investors’ interest in growth stocks is evident from the SPDR Portfolio S&P 500 Growth ETF’s (SPYG) robust returns of 33.5% over the past year.
So, let’s take a look at the fundamentals of the four high-growth stocks trading above their 50-day moving averages.
Spotify Technology S.A. (SPOT)
Based in Luxembourg City, Luxembourg, SPOT provides audio streaming subscription services worldwide. It operates through two segments, Premium and Ad-Supported.
In terms of the trailing-12-month asset turnover ratio, SPOT’s 1.67x is 233.9% higher than the 0.50x industry average. Likewise, its $18.71 trailing-12-month cash per share is significantly higher than the $1.50 industry average.
SPOT’s revenue for the first quarter that ended March 31, 2024, rose 9.5% year-over-year to €3.64 billion ($3.90 billion). Its gross profit increased 9.3% year-over-year to €1 billion ($1.07 billion).
Likewise, the company’s net income came in at €197 million ($211.08 million), compared to a loss of €225 million ($241.08 million) in the previous-year quarter. Also, its earnings per share came in at €0.97, compared to loss per share €1.16 in the previous-year quarter.
SPOT’s revenue grew at a CAGR of 19.7% over the past five years. In addition, its total assets grew at a CAGR of 10.2% over the past five years.
Street expects SPOT’s revenue and EPS for the third quarter ending September 2024 to increase 19.9% and 294.7% year-over-year to $4.26 billion and $1.38, respectively.
Over the past six months, the stock gained 62% to close the last trading session at $311.22. The stock is trading above its 50-day moving average of $300.17, indicating an uptrend.
SPOT’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
SPOT has an A grade for Growth and a B in Sentiment and Quality. It is ranked first among five stocks in the B-rated Entertainment - Radio industry.
In addition to the POWR Ratings we’ve stated above, we also have SPOT ratings for Value, Momentum, and Stability. Get all SPOT ratings here.
Pure Storage, Inc. (PSTG)
PSTG engages in the provision of data storage and management technologies, products, and services in the United States and internationally. The company’s Purity software is shared across its products and provides enterprise-class data services.
On June 5, 2024, PSTG, the IT pioneer that delivers the world's most advanced data storage platform, and LandingAI, the leading visual AI company, announced Pure's strategic investment in LandingAI to help power the future of vision AI.
PSTG delivers a data storage platform that enables customers to realize the potential of AI at any stage of the AI journey. The promise of LandingAI's multi-modal Large Vision Model (LVM) solutions would help shape the future of vision AI for the enterprises that PSTG serves.
PSTG’s trailing-12-month gross profit margin of 71.68% is 44.6% higher than the industry average of 49.56%. Its trailing-12-month net income margin and levered FCF margin of 3.19% and 15.58% are 12.8% and 54% higher than the industry averages of 2.83% and 10.12%, respectively.
For the fiscal first quarter that ended May 5, 2024, PSTG’s total revenue increased 17.7% year-over-year to $693.48 million. Its non-GAAP gross profit increased 20.4% year-over-year to $512.16 million. The company’s non-GAAP net income increased 334.7% year-over-year to $107.30 million, and net income per share grew 300% year-over-year to $0.32.
PSTG’s revenue grew at a CAGR of 15.5% over the past five years. In addition, its total assets grew at a CAGR of 11.9% over the past five years.
Analysts expect PSTG’s EPS for the second quarter ending July 2024, to increase 8.2% year-over-year to $0.37. The company’s revenue is expected to grow 9.8% year-over-year to $756.12 million for the same quarter. Further, PSTG topped the consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
PSTG’s stock has gained 85.3% over the past six months to close the last trading session at $67.81. The stock is trading above its 50-day moving average of $57.32, indicating an uptrend.
PSTG’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has an A grade for Growth and Quality and a B for Sentiment. PSTG is ranked first in the A-rated Technology - Storage industry.
Click here to access all PSTG ratings (Momentum, Stability, and Value).
Annaly Capital Management, Inc. (NLY)
NLY is a diversified capital manager that engages in mortgage finance. The company invests in agency mortgage-backed securities collateralized by residential mortgages and other real estate-related securities.
On June 5, 2024, NLY declared the second quarter 2024 common stock cash dividend of $0.65 per common share, payable on July 31, 2024. The company pays $2.60 annually, which translates to a yield of 12.93% on the prevailing price level. Its four-year average dividend yield is 13.57%.
NLY’s trailing-12-month cash from operations of $5.08 billion is considerably higher than the industry average of $159.85 million.
During the first quarter that ended March 31, 2024, NLY’s interest income increased 37.8% from the prior year’s period to $1.09 billion, and its net servicing income increased 34.7% year-over-year to $102.87 million. Its net income came in at $465.17 million, or $0.85 per share, against a net loss of $839.34 million, or $1.79 per share, during the year-ago period, respectively.
NLY’s total assets grew at a CAGR of 2.3% over the past three years and at a CAGR of 5.4% over the past year.
Street expects NLY’s EPS for the quarter ending September 2024 to increase 1.5% year-over-year to $0.67. The company’s revenue is expected to grow 63.7% year-over-year to $1.39 billion for the year ending December 2025.
Over the past three months, the stock has gained 3.2% to close the last trading session at $20.11. The stock is trading above its 50-day moving average of $19.36, indicating an uptrend.
NLY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has an A grade for Growth. Within the REITs - Mortgage industry, NLY is ranked #6 out of 27 stocks.
Click here to access additional ratings of NLY for Stability, Value, Sentiment, Quality, and Momentum.
Wix.com Ltd. (WIX)
Headquartered in Tel Aviv, Israel, WIX develops and markets a cloud-based platform for creating a website or web application in North America, Europe, Latin America, Asia, and internationally.
On May 16, 2024, WIX announced the launch of three new AI-powered image enhancement and creation tools to help users create and display high-quality images that improve, customize, and personalize visual content to their specific needs.
WIX’s trailing-12-month gross profit margin of 67.63% is 36.2% higher than the industry average of 49.66%. Its 4.20% trailing-12-month net income margin is 45.6% higher than the 2.88% industry average.
Over the past three and five years, its revenue grew at CAGRs of 14.3% and 20.2%, respectively, while its total assets grew at a 12.2% CAGR over the past five years.
For the fiscal first quarter that ended March 31, 2024, WIX’s revenues and non-GAAP gross profit stood at $304.29 million and $286.74 million, up 9.4% and 17.2% year-over-year, respectively.
For the same quarter, its non-GAAP net income and non-GAAP net income per share stood at $77.29 million and $1.29, up 51.3% and 41.8% from the year-ago quarter, respectively.
Analysts expect WIX’s revenue for the second quarter (ending June 2024) to increase 11.2% year-over-year to $433.76 million. The company’s EPS is expected to grow 6.7% year-over-year to $1.34 for the same period. Moreover, the company has topped the consensus EPS and revenue estimates in each of the four trailing quarters.
WIX’s stock has surged 19% over the past three months to close the last trading session at $161.33. The stock is trading above its 50-day moving average of $142.04, indicating an uptrend.
WIX’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
The stock has an A grade for Growth and a B for Sentiment and Quality. Within the Internet - Services industry, WIX is ranked #4 out of 28 stocks.
Click here to access additional ratings of WIX for Stability, Momentum, and Value.
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SPOT shares were trading at $310.01 per share on Tuesday afternoon, down $1.21 (-0.39%). Year-to-date, SPOT has gained 64.98%, versus a 15.63% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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