By their very nature, growth investors are primarily focused on finding companies whose earnings and revenue are expected grow at a rate that outpaces the market. This investment strategy comes with its fair share of risks, but it also brings the exciting possibility of outsized returns—an end goal that every investor desires.
Over the past several years, Wall Street’s most exciting growth stocks have emerged from the technology sector. From industry innovators like Amazon (AMZN - Free Report) and Netflix (NFLX - Free Report) to exciting foreign stocks such as Alibaba (BABA - Free Report) , tech-focused growth investors have been rewarded with massive profits recently.
Strong earnings and impressive sales imply that the technology sector’s hot streak could continue throughout 2018—despite recent market-wide volatility. That means that growth investors searching for the next great market-beating stock might want to keep their focus on tech companies.
Luckily, we can pair the proven Zacks Rank with our innovative Style Scores system, which includes a “Growth” category, to find strong growth tech stocks. Investors should note that our Growth category values earnings and sales growth, as well as improvements to a company’s financial statements—including strong cash flows and great return on equity.
With all of this said, check out these three tech stocks for growth investors to consider now:
1. AppFolio, Inc. (APPF - Free Report)
AppFolio offers cloud-based software solutions for the property management and legal industries. The company’s AppFolio Property Manager is a leading solution for property management, while its MyCase application is ideal for practitioners and small law firms. Currently, the stock is a Zacks Rank #2 (Buy).
AppFolio recently surged into profitability, which is something that investors tend to reward. This fiscal year, current estimates are calling for earnings growth of 93% and net sales growth of 28%. The company is also improving its cash position, generating quadruple-digit cash flow growth and operating with a net margin of nearly 11%.
The firm has also proven to be an efficient one, with Return on Equity of 20% crushing its industry average. AppFolio should be able to use this, and its solid margins, to capitalize on its new business opportunities. APPF has also displayed the strength of small caps recently, adding about 100% over the past six months.
2. Cypress Semiconductor (CY - Free Report)
Cypress Semiconductor makes chips designed for the automotive, industrial, home automation and appliances, consumer electronics and medical products industries. It has emerged as a leader in the Internet of Things industry after shelling out $550 million for Broadcom’s IoT business in 2016. Cypress’ “WICED” IoT platform is part of one of the largest such portfolios in the industry.
While semiconductor stocks have been volatile at times this year, we believe there is still plenty of growth opportunity in secular trends like IoT. This should give Cypress a unique opportunity to keep expanding, even as cyclical industry concerns persist.
According to our latest consensus estimates, analysts expect to finish the current fiscal year with EPS growth of nearly 51% over the prior year. Cypress also has a long-term projected annual EPS growth rate in excess of 16% right now. Meanwhile, CY is holding a Zacks Rank #2 (Buy).
3. NetApp, Inc. (NTAP - Free Report)
NetApp specializes in hybrid cloud solutions; in other words, it provides data-based services which simplify the management of applications cloud and on-premises environments. NetApp’s products and solutions are in high demand as enterprises around the world continue modernizing and adapting to cloud technology. The stock sports a Zacks Rank #1 (Strong Buy) and sports promising growth characteristics.
Notably, NetApp has an “A” grade for Growth in our Style Scores system. Earnings are projected to improve by more than 27% in 2018, and that growth is expected to continue to the tune of 14% on a long-term, annualized basis. NetApp is also notching cash flow growth of about 25% right now.
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