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5 Growth Stocks With Strong Balance Sheets

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The latest data points to the fact that the U.S. economy is rapidly getting back on track.

The latest ISM data shows July PMI at 54.2, the highest level in the past year, with greatest strength in the food, beverage and tobacco sector, followed by chemical products, computer & electronic products and then petroleum and coal. This represents encouraging expansion in manufacturing.

The latest data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD) shows an 18.8% (+/- 1.1%) increase in July building permits over June and a 9.4% (+/- 1.5%) increase over July 2019. Housing starts jumped 22.6% (+/-14.7%) from June and 23.4% (+/-12.4%) from last year. This represents strength in housing.

The unemployment rate remains high with roughly a fifth of the population still without jobs or without adequate hours of work. However, according to the Bureau of Labor Statistics, the July national unemployment rate was 0.9 percentage point lower than June, although of course it was still significantly higher (by 6.5 points) than last year. This indicates that the employment situation is also limping back.  

And this is despite the fact that there was a second surge in infections with some states partially locking down, as necessary.

So it isn’t surprising that stock prices are going through the roof, sending markets soaring and the Nasdaq to new all-time highs. And if history is anything to go by, this bull market should have legs.

There’s one reason for caution however. At least some of the good news is attributable to the government stimulus. So if that isn’t continued, we don’t really know how this will end.   

So on the one hand, there is reason to believe that this market will continue on its way up while on the other, there’s the concern that more free money isn’t coming. To make the most of the situation, I’ve picked some growth stocks that are trading somewhat lower than their 52-week highs that however have strong balance sheets and the flexibility to wiggle out of a difficult situation, if it arises.

Take a look-

FormFactor, Inc. (FORM - Free Report)

FormFactor is an OEM of automated wafer probe cards and also offers analytical probes, probe stations, thermal sub-systems and related services used in the back-end portion of the semiconductor manufacturing process.

Probe Cards test the design layout and electrical attachments in semiconductor devices including systems on a chip (SoCs), mobile application processors, microprocessors, microcontrollers, graphic processors, radio frequency, analog, mixed signal, image sensors, electrooptical, dynamic random access memory (DRAM), NAND flash memory and NOR flash memory devices made by foundry, logic and memory manufacturers.

Most backend operations take place in Asia, so most of its revenues come from the region. North America has become a bigger contributor in recent times because of the increasing level of manufacturing activity in the region.

Zacks Rank #1

Growth Score B

Earnings expected to grow 27.88% in 2020 and 9.96% in 2021

Revenue expected to grow 13.3% in 2020 and 6.87% in 2021

Debt/Total Capital 7.44%

Quick Ratio 2.46X

 

Liquidity Services, Inc. (LQDT - Free Report)

Liquidity Services operates a network of leading e-commerce marketplaces and solutions to manage, value and sell off inventory as well as new and used equipment for its 10,000+ business and government clients.

It sells approximately 500 product categories, including consumer electronics, general merchandise, apparel, scientific equipment, aerospace parts and equipment, technology hardware, energy equipment, industrial capital assets, fleet and transportation equipment, and specialty equipment.

Zacks Rank #1

Growth Score A

Earnings expected to grow 27.27% in 2020 and 150.0% in 2021

Revenue expected to grow -10.8% in 2020 and 15.49% in 2021

Debt/Total Capital 0%

Quick Ratio 1.22X

 

K12 Inc (LRN - Free Report)

K12, a technology-based education company, is a leading national provider of proprietary curriculum and educational services created for online delivery to students in kindergarten through 12th grade, or K-12. Its mission is to maximize a child's potential by providing access to an engaging and effective education, regardless of geographic location or socio-economic background.

Zacks Rank #1

Growth Score B

Earnings expected to grow 73.33% in 2020 and 20.67% in 2021

Revenue expected to grow 25.18% in 2020 and 3.27% in 2021

Debt/Total Capital 0%

Quick Ratio 1.22X

 

Medifast Inc. (MED - Free Report)

Medifast, recommended by more than 20,000 doctors, produces, distributes and sells weight loss and other health-related products through websites, multi-level marketing, telemarketing, franchised weight loss clinics and medical professionals. Its OPTAVIA brand of health products are sold through “health coaches”, who provide health-related information and programs to help customers build healthier habits. Its franchise partners, resellers and Scientific Advisory Board facilitate the process.

Zacks Rank #1

Growth Score A

Earnings expected to grow 37.08% in 2020 and 24.70% in 2021

Revenue expected to grow 22.24% in 2020 and 18.43% in 2021

Debt/Total Capital 0%

Quick Ratio 1.33X

 

Zoom Video Communications, Inc. (ZM - Free Report)

Zoom Video Communications’ cloud-native unified communications platform, which combines video, audio, phone, screen sharing and chat functionalities across mobile devices, desktops, laptops, telephones and conference room systems, makes remote-working and collaboration easy. Undoubtedly, the company is benefiting from the work-from-home and online learning wave following the coronavirus pandemic outbreak that forced more and more people to stay home.

Zoom Video’s solutions include Zoom Meetings (integrates with Atlassian, Dropbox, Google, LinkedIn, Microsoft, Salesforce and Slack), Zoom Rooms, Zoom Phone (launched in 2019), Zoom Chat, Zoom Conference Room Connector, Zoom Video Webinars (up to 10,000 view-only attendees), Zoom for Developers and Zoom App Marketplace.

Zoom Video went for an Initial Public Offering (IPO) on Apr 17, 2019.

The company generates revenues from the sale of subscriptions to its video-first communications platform. Subscription revenues are driven, primarily by the number of paid hosts as well as purchases of additional products including Zoom Rooms, Zoom Video Webinars and Zoom Phone.

As of Apr 30, 2020, the company had approximately 265.4K customers with more than 10 employees.

Zacks Rank #1

Growth Score A

Earnings expected to grow 37.08% in 2020 and 24.70% in 2021

Revenue expected to grow 22.24% in 2020 and 18.43% in 2021

Debt/Total Capital 0%

Quick Ratio 1.33X

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