25 Mar 4 US Growth Stocks with Explosive Potential
The recent bear market in the NASDAQ Composite Index may have put off growth investors.
The plunge in prices was in response to the US Federal Reserve’s commitment to raising interest rates to fight runaway inflation.
Seen through another lens, the broad-based decline in share prices could also represent an opportunity to accumulate companies at cheaper valuations.
One thing is clear, though.
Many businesses are still posting healthy growth and encouraging numbers.
The share price declines make these companies more attractive, assuming the underlying growth thesis remains valid.
Here are four US stocks that have the potential to post continued growth.
Parker-Hannifin Corporation (NYSE: PH)
Parker-Hannifin is a leader in motion and control technologies and serves customers in a diversified range of industrial and aerospace markets.
The company commands pole position in the US$135 billion industry and has around an 11% market share, along with a global network of 17,000 distribution outlets.
For its fiscal 2022’s first half (1H2022) ended 31 December 2021, the company reported a 14.2% year on year jump in net sales to US$7.6 billion.
Net profit rose by 9.2% year on year to US$838.8 million.
A quarterly dividend of US$1.03 per share was declared, bringing 1H2022’s dividend to US$2.06, up 17% year on year compared to the same period a year ago.
Parker-Hannifin has an enviable track record of raising its annual dividend for 65 consecutive years.
For FY2021, the company generated US$2.4 billion worth of free cash flow for a free cash flow margin of 16.5%, an improvement over the 11.1% margin five years ago.
At a recent investor meeting earlier this month, Parker-Hannifin announced new five-year targets that the company believes are achievable due to an acceleration in organic sales growth and after integrating recent acquisitions.
Chipotle Mexican Grill (NYSE: CMG)
Chipotle Mexican Grill owns and operates a chain of over 2,950 restaurants in the US, Canada, the UK and Europe as of 31 December 2021 serving Mexican food such as tacos and burritos.
For its FY2021 ended 31 December 2021, the company reported a 26.1% year on year jump in revenue to US$7.5 billion.
The better performance was accompanied by a 19.3% year on year increase in comparable store sales.
Operating profit more than doubled year on year to US$804.5 million while net profit soared by 83.5% year on year to US$653 million.
Last month, Chipotle announced the opening of its 3,000th restaurant in Phoenix, Arizona, and CEO Brian Niccol believes the company can achieve its target of 7,000 restaurants or more in the US.
Earlier this month, the Mexican restaurant chain also announced its first new chicken dish in its 29-year history, pollo asado, that’s available for a limited time in the US and Canada.
Mercadolibre (NASDAQ: MELI)
Mercadolibre is the largest e-commerce and online payments company in Latin America.
The company posted strong growth for FY2021, with revenue surging 77.9% year on year to US$7.1 billion.
Operating profit more than tripled year on year to US$440.7 million while Mercadolibre booked a net profit of US$83.3 million, reversing a small loss of US$707,000 a year ago.
The e-commerce company also reported solid operating metrics — unique active users on its platform increased from 132.5 million in FY2020 to 139.5 million in FY2021.
Gross merchandise volume climbed 35.5% year on year to US$28.3 billion and total payment volume for its payments platform surged by 55.5% year on year to US$77.4 billion.
E-commerce penetration in the Latin American region remains low at just 10% or so, allowing the company a long runway for future growth.
Rollins (NYSE: ROL)
Rollins provides pest control services and serves a total of 2.8 million commercial and residential customers around the world.
For FY2021, Rollins reported a 12.2% year on year increase in revenue to US$2.4 billion.
Net profit jumped by 34.5% year on year to US$350.7 million.
A quarterly cash dividend of US$0.10 per share was declared.
The company also has a track record of consistent free cash flow generation over the last decade.
Last December, Rollins expanded its business into South Florida under Northwest Exterminating, one of the company’s units, by purchasing seven branches from Hulett Environment Services.
Disclaimer: Royston Yang does not own shares in any of the companies mentioned.