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6 Stocks with Good Growth Records & Attractive Valuations
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We are coming to the close of the first quarter of 2021 and it’s clear that the economy is limping – or should I say leaping – back to normal.
The first two quarters of 2021 will see easier comps for most sectors because the pandemic hit in March 2020 and we had lockdowns going into June. But easier comps aren’t the only reason for the strong expectations. As companies resumed production and sales, the outlook continued to improve. So quarterly expectations have improved steadily.
The earnings growth expectation for quarter one of 2021 was 11.7% back in December. But with repeated revisions right through the past few months, it now stands at 18.5%. What’s more, second quarter earnings growth expectation is currently at 48.7% (mainly because the second quarter of 2020 was the weakest).
Last year, the strongest sectors were technology and construction with auto picking up towards year-end. But this year is very different with most of the industrials and basic materials also joining the fray. Even the pandemic-hit entertainment, airlines, restaurant and other services are expected to come back as more and more people get inoculated.
And the best part is that Americans have the money to spend on these things given the record-high savings rate and stimulus checks the government is serving up.
So this is a great time to invest in stocks. And needless to say, investors are making the most of it.
No matter what your risk appetite or your investment goals, it’s important to remember that we want to minimize losses. So check the past performance and go with the experts on the future performance.
Because chances are that a company generating solid results over the last five years won’t suddenly change course.
Particularly if it belongs to an industry with multiple growth drivers.
And also, if analyst estimates point to attractive growth this year and strong long-term potential.
All the better if they have sufficient liquidity to continue pursuing growth.
And of course an attractive valuation.
So with all that in mind, let’s look at a few stocks-
Fort Wayne, IN-based Steel Dynamics is among the leading steel producers and metal recyclers in the United States with a steelmaking and coating capacity of more than 11 million tons. It’s one of the most diversified steel companies with a vast range of specialty products. The company offers steel products, recycled ferrous and nonferrous metals, and steel joist and decking products for both domestic and international consumption.
This Zacks Rank #1 (Strong Buy) company belongs to the Steel – Producers industry (top 9%).
In the last 5 years its earnings have grown 22.1% and its estimated long-term earnings growth rate is 12.0%.
Revenue and earnings are expected to grow 17.6% and 56.7%, respectively this year with a drop-off forecasted for 2022.
The company’s current assets are sufficient to cover its current liabilities/obligations 3.38X over. So it is not financially constrained from pursuing growth.
Valuation: At 11.07X forward P/E the shares look cheap, especially considering the company’s steady performance in the last five years, future growth potential and financial liquidity.
Brazilian steel maker Gerdau S.A. is the largest long steel producer in Latin America. Gerdau steel is used in construction and industry as well as in the automotive and agricultural sectors.
This Zacks Rank #2 (Buy) company is also part of the Steel – Producers industry (top 9%).
In the last 5 years its earnings have grown 43.1% while its long-term earnings growth rate is estimated to be 14.6%.
Revenue and earnings are expected to grow 25.6% and 66.1%, respectively this year with a drop-off forecasted for 2022.
Its current assets can meet current obligations 2.04X.
Valuation: At 9.53X forward earnings, the shares are trading cheap.
Texas-based home construction company D.R. Horton primarily focuses on the construction and sale of single-family houses for entry-level and move-up customers. D.R. Horton’s operations are spread over 90 markets across 29 states in the East, Midwest, Southeast, South Central, Southwest and West regions of the United States. Its houses are sold under the brand names D.R. Horton - America’s Builder, Emerald Homes, Express Homes and Freedom Homes.
This Zacks Rank #2 company belongs to the Building Products - Home Builders industry (top 16%).
In the last 5 years its earnings have grown 26.4% and its estimated long-term earnings growth rate is 13.4%.
Revenue and earnings are expected to grow 28.3% and 41.8%, respectively this year with a slight deceleration forecasted for 2022.
Its current ratio of 6.28 indicates that its current assets are 6.28X its current liabilities.
Valuation: At 8.87X forward earnings, the shares are trading cheap.
M.D.C. Holdings, Inc.
M.D.C. Holdings is engaged in the construction, sale and related financing of residential housing and the acquisition and development of land for use in the Denver, Phoenix, Maryland, Virginia, mid-Atlantic region, Las Vegas, Dallas, California metropolitan areas. MDC's homebuilding subsidiaries operate under the name Richmond American Homes.
This Zacks Rank #2 company is also part of the Building Products - Home Builders industry (top 16%).
In the last 5 years its earnings have grown 32.5%.
Its estimated long-term earnings growth rate is 10.6%.
Revenue and earnings are expected to grow 33.4% and 34.6%, respectively this year with a slight deceleration forecasted for 2022.
Its current ratio is 7.43.
Valuation: At 8.25X forward earnings, the shares are trading cheap.
Bentonville, AR-based America's Car-Mart is one of the largest automotive retailers in the United States focused exclusively on the Buy Here/Pay Here segment of the used car market. The company operates its dealerships primarily in small cities and rural locations throughout the South-Central United States, selling quality used vehicles and providing financing for substantially all of its customers.
It carries a Zacks Rank #2 (Buy).
It belongs in the Automotive - Retail and Whole Sales industry (top 17%).
In the last 5 years its earnings have grown 47.1%.
Its estimated long-term earnings growth rate is 13.6%.
Revenue and earnings are expected to grow 16.5% and 56.2%, respectively this year (ending April). Current estimates for 2022 indicate a respective 6.3% and 2.6% increase in revenue and earnings.
Current ratio is 2.03.
Valuation: At 14.15X forward earnings, the shares look cheap.
Hartford, CT-based Virtus Investment Partners provides investment management products and services to individuals and institutions in the United States. Virtus offers a variety of investment styles and multiple disciplines to cater to the varying needs of investors. Its retail products include open-end mutual funds, closed-end funds and separately managed accounts. The company manages institutional accounts for corporations, multi-employer retirement funds and foundations, endowments, special purpose funds and other types of institutions.
It carries a Zacks Rank #2 (Buy).
It belongs in the Financial - Investment Management industry (top 26%).
In the last 5 years its earnings have grown 30.5%.
Its estimated long-term earnings growth rate is 30.8%.
Revenue and earnings are expected to grow 48.5% and 72.2%, respectively this year with a deceleration forecasted for 2022.
Current ratio is 18.08.
Valuation: At 9.30X forward earnings, the shares are trading cheap.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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6 Stocks with Good Growth Records & Attractive Valuations
We are coming to the close of the first quarter of 2021 and it’s clear that the economy is limping – or should I say leaping – back to normal.
The first two quarters of 2021 will see easier comps for most sectors because the pandemic hit in March 2020 and we had lockdowns going into June. But easier comps aren’t the only reason for the strong expectations. As companies resumed production and sales, the outlook continued to improve. So quarterly expectations have improved steadily.
The earnings growth expectation for quarter one of 2021 was 11.7% back in December. But with repeated revisions right through the past few months, it now stands at 18.5%. What’s more, second quarter earnings growth expectation is currently at 48.7% (mainly because the second quarter of 2020 was the weakest).
Last year, the strongest sectors were technology and construction with auto picking up towards year-end. But this year is very different with most of the industrials and basic materials also joining the fray. Even the pandemic-hit entertainment, airlines, restaurant and other services are expected to come back as more and more people get inoculated.
And the best part is that Americans have the money to spend on these things given the record-high savings rate and stimulus checks the government is serving up.
So this is a great time to invest in stocks. And needless to say, investors are making the most of it.
No matter what your risk appetite or your investment goals, it’s important to remember that we want to minimize losses. So check the past performance and go with the experts on the future performance.
Because chances are that a company generating solid results over the last five years won’t suddenly change course.
Particularly if it belongs to an industry with multiple growth drivers.
And also, if analyst estimates point to attractive growth this year and strong long-term potential.
All the better if they have sufficient liquidity to continue pursuing growth.
And of course an attractive valuation.
So with all that in mind, let’s look at a few stocks-
Steel Dynamics, Inc. (STLD - Free Report)
Fort Wayne, IN-based Steel Dynamics is among the leading steel producers and metal recyclers in the United States with a steelmaking and coating capacity of more than 11 million tons. It’s one of the most diversified steel companies with a vast range of specialty products. The company offers steel products, recycled ferrous and nonferrous metals, and steel joist and decking products for both domestic and international consumption.
This Zacks Rank #1 (Strong Buy) company belongs to the Steel – Producers industry (top 9%).
In the last 5 years its earnings have grown 22.1% and its estimated long-term earnings growth rate is 12.0%.
Revenue and earnings are expected to grow 17.6% and 56.7%, respectively this year with a drop-off forecasted for 2022.
The company’s current assets are sufficient to cover its current liabilities/obligations 3.38X over. So it is not financially constrained from pursuing growth.
Valuation: At 11.07X forward P/E the shares look cheap, especially considering the company’s steady performance in the last five years, future growth potential and financial liquidity.
Gerdau S.A. (GGB - Free Report)
Brazilian steel maker Gerdau S.A. is the largest long steel producer in Latin America. Gerdau steel is used in construction and industry as well as in the automotive and agricultural sectors.
This Zacks Rank #2 (Buy) company is also part of the Steel – Producers industry (top 9%).
In the last 5 years its earnings have grown 43.1% while its long-term earnings growth rate is estimated to be 14.6%.
Revenue and earnings are expected to grow 25.6% and 66.1%, respectively this year with a drop-off forecasted for 2022.
Its current assets can meet current obligations 2.04X.
Valuation: At 9.53X forward earnings, the shares are trading cheap.
D.R. Horton, Inc. (DHI - Free Report)
Texas-based home construction company D.R. Horton primarily focuses on the construction and sale of single-family houses for entry-level and move-up customers. D.R. Horton’s operations are spread over 90 markets across 29 states in the East, Midwest, Southeast, South Central, Southwest and West regions of the United States. Its houses are sold under the brand names D.R. Horton - America’s Builder, Emerald Homes, Express Homes and Freedom Homes.
This Zacks Rank #2 company belongs to the Building Products - Home Builders industry (top 16%).
In the last 5 years its earnings have grown 26.4% and its estimated long-term earnings growth rate is 13.4%.
Revenue and earnings are expected to grow 28.3% and 41.8%, respectively this year with a slight deceleration forecasted for 2022.
Its current ratio of 6.28 indicates that its current assets are 6.28X its current liabilities.
Valuation: At 8.87X forward earnings, the shares are trading cheap.
M.D.C. Holdings, Inc.
M.D.C. Holdings is engaged in the construction, sale and related financing of residential housing and the acquisition and development of land for use in the Denver, Phoenix, Maryland, Virginia, mid-Atlantic region, Las Vegas, Dallas, California metropolitan areas. MDC's homebuilding subsidiaries operate under the name Richmond American Homes.
This Zacks Rank #2 company is also part of the Building Products - Home Builders industry (top 16%).
In the last 5 years its earnings have grown 32.5%.
Its estimated long-term earnings growth rate is 10.6%.
Revenue and earnings are expected to grow 33.4% and 34.6%, respectively this year with a slight deceleration forecasted for 2022.
Its current ratio is 7.43.
Valuation: At 8.25X forward earnings, the shares are trading cheap.
Americas CarMart, Inc. (CRMT - Free Report)
Bentonville, AR-based America's Car-Mart is one of the largest automotive retailers in the United States focused exclusively on the Buy Here/Pay Here segment of the used car market. The company operates its dealerships primarily in small cities and rural locations throughout the South-Central United States, selling quality used vehicles and providing financing for substantially all of its customers.
It carries a Zacks Rank #2 (Buy).
It belongs in the Automotive - Retail and Whole Sales industry (top 17%).
In the last 5 years its earnings have grown 47.1%.
Its estimated long-term earnings growth rate is 13.6%.
Revenue and earnings are expected to grow 16.5% and 56.2%, respectively this year (ending April). Current estimates for 2022 indicate a respective 6.3% and 2.6% increase in revenue and earnings.
Current ratio is 2.03.
Valuation: At 14.15X forward earnings, the shares look cheap.
Virtus Investment Partners, Inc. (VRTS - Free Report)
Hartford, CT-based Virtus Investment Partners provides investment management products and services to individuals and institutions in the United States. Virtus offers a variety of investment styles and multiple disciplines to cater to the varying needs of investors. Its retail products include open-end mutual funds, closed-end funds and separately managed accounts. The company manages institutional accounts for corporations, multi-employer retirement funds and foundations, endowments, special purpose funds and other types of institutions.
It carries a Zacks Rank #2 (Buy).
It belongs in the Financial - Investment Management industry (top 26%).
In the last 5 years its earnings have grown 30.5%.
Its estimated long-term earnings growth rate is 30.8%.
Revenue and earnings are expected to grow 48.5% and 72.2%, respectively this year with a deceleration forecasted for 2022.
Current ratio is 18.08.
Valuation: At 9.30X forward earnings, the shares are trading cheap.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2021 today >>