Let’s talk about growth. With corona receding, politics growing less exciting, and a new year ahead, investors are getting optimistic – and that means there’s a hunt for stocks that will bring in strong returns. In other words, growth stocks.
In a recent interview, Jan Hatzius, chief economist at investment giant Goldman Sachs, said that he sees GDP growth in 2Q21 hitting as high as 10%. In an environment like that, most stocks are going to show a growth trend.
Now, we all know that past performance won’t guarantee future results. Still, the best place to start looking for tomorrow’s high-growth stocks is among yesterday’s winners.
Bearing this in mind, we set out to find stocks flagged as exciting growth plays by Wall Street. Using the Investing Insights platform, we locked in on three analyst-backed names that have already notched impressive gains and boast a Perfect 10 from the Smart Score metric. Here are the details.
We will start with Kaleyra (NYSE:KLR), a cloud computing company offering communications solutions. The company’s SaaS platform supports SMS, voice calls, and chatbots – a product with obvious applications and value in today’s office climate, with the strong push to telecommuting and remote work. Kaleyra boasts over 3,500 customers, who make 3 billion voice calls and sent 27 billion text messages in 2019 (the last year with full numbers available).
Over the past 6 months, KLR shares have shown tremendous growth, appreciating 155%. Kaleyra’s revenues have grown along with the share value. The company’s 3Q20 results hit $38.3 million, the best since KLR went public. While Kaleyra still runs a net earnings loss each quarter, the Q3 EPS was the lowest such loss in the past four quarters.
Maxim analyst Allen Klee is bullish on KLR, seeing recent growth and product offerings as indicative of future performance.
“Over the past few years, Kaleyra has posted double-digit revenue growth and positive adjusted EBITDA. We forecast revenue growth of 9%, 22%, and 28% for 2020-2022. We project adjusted EBITDA declines in 2020 to reflect public company costs and COVID-19, but growth at over twice the rate of revenue for the following two years. We expect benefits from operating leverage, low-cost tech employees, cost volume discounts as the company expands, and margin improvement from new offerings and geographies. Over the longer term, we believe the company can grow revenue close to 30% with even faster bottom line growth,” Klee opined.
With such growth, it’s no wonder Klee takes a bullish stance on KLR. To kick off his coverage, the analyst published a Buy rating and set a $22 price target. This figure implies a 45% for the coming year.
Overall, based on the 3 Buy ratings vs no Holds or Sells assigned in the last three months, Wall Street analysts agree that this ‘Strong Buy’ is a solid bet. It also doesn’t hurt that its $19 average price target implies ~26% upside potential. (See KLR stock analysis)
Vista Outdoor (VSTO)
Next up, Vista Outdoor Inc (NYSE:VSTO), is a venerable company that saw its niche gain attractiveness in recent times. Vista is a sporting goods company, with 40 brands in two main divisions: outdoor products and shooting sports. Vista’s brands include well-known names as Bushnell Golf, CamelBak, and Remington. The company has found a burst of success in the ‘corona year’ as people have turned more and more to outdoor activities that can be practiced solo or in small groups – expanding the customer base. VSTO shares are up as a result, by 214% in the last 12 months.
Vista’s earnings reflect the increase in consumer interest in outdoor sports. The company’s EPS grew in 2020, turning from a net loss to a $1.34 per share profit in the fiscal Q2 report (released in November). The fiscal Q3 report, released earlier this month, showed lower earnings, at $1.31 per share, but was still considered solid by the company, as it covered winter months when the company normally sees a revenue decline. Both quarters showed strong year-over-year EPS gains.
Covering Vista for B. Riley, 5-star analyst Eric Wold sees several avenues for continued growth by Vista. He is impressed by the growth in firearm and ammunition sales, and by the price increase for products in both the outdoor goods and the shooting sports divisions.
“Given our expectation that the increased industry participation numbers for both outdoor products and shooting sports during the pandemic will represent an incremental tailwind for VSTO in the coming years beyond the impressive production visibility that has been created by depleted channel inventory levels, we continue to see an attractive set-up for baseline growth,” Wold commented.
Overall, Wold is bullish on the stock and rates it a Buy, with a $41 price target. This figure indicates room for 27% upside in the coming year.
Vista is another company with a unanimous Strong Buy consensus rating. That rating is based on 9 recent reviews, all to Buy. VSTO shares have an average price target of $36.78, which gives an upside of 14% from the trading price of $32.15. (See VSTO stock analysis)
Textainer Group Holdings (TGH)
You might not think about the ubiquitous cargo container, but these deceptively simple metal boxes have changed the face of bulk transport since their breakout proliferation in the 1960s. These containers make it easy to organize, load, ship, and track vast amounts of cargo, and are especially valuable for their ease of switching; containers can be quickly loaded on or switched between ships, trains, and trucks.
Textainer Group Holdings (NYSE:TGH)is a billion-dollar company that buys, owns, and leases shipping containers for the cargo industry. The company has over 250 customers, and boasts a fleet of 3 million twenty-foot equivalent units (TEUs). Textainer is also a major reseller of used containers, and operates from 500 depots around the world.
Even during the corona pandemic, when international trading routes and patterns were badly disrupted, and the quarterly revenues were down year-over-year, Textainer saw share gains. The company’s stock soared 110% over the past 12 months. The bulk of these gains have come in the past six months, as economies – and trading patterns – have begun to reopen.
Looking at Textainer for B. Riley, analyst Daniel Day is deeply impressed. He sees this company as the lowest priced among its peer group, with a strong market share in a competitive industry. Day rates TGH a Buy, and his $31 price target suggests it has room for 57% growth ahead of it.
In support of this bullish stance, Day writes, in part, “We believe that TGH is an underfollowed, misunderstood name that is ideal for the portfolio of a deep value investor looking for cash flow–generative names trading at a steep discount to intrinsic value. With new container prices at multiyear highs amid a resurgence in container shipping, we expect upcoming earnings results to be positive catalyst events for TGH…”
Some stocks fly under the radar, and TGH is one of those. Day’s is the only recent analyst review of this company, and it is decidedly positive. (See TGH stock analysis)
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