Since the beginning of the year, the benchmark indexes have witnessed severe volatility due to the Fed’s upcoming rate hikes to reign in the multi-decade high inflation. In addition, the war in Ukraine has led to significant correction recently due to investors’ fears over global trade disruptions. The Dow Jones Industrial Average is down 8.4% year-to-date, while the S&P 500 and Nasdaq Composite have lost 11% and 18.2% year-to-date, respectively.
However, as the economy continues its recovery, growth stocks should perform well in the near term. Also, the recent correction has led to several growth stocks trading at attractive valuations. Moreover, the expected improvement in corporate earnings should support the performance of growth stocks. According to a FactSet report, the S&P 500 is expected to report earnings growth of 9% year-over-year in 2022.
That’s why today we're highlighting 3 exciting stocks from our Top 10 Growth screen, which is just 1 of the 10 screens in our POWR Screens 10 service (more on that below). Elbit Systems Ltd. (ESLT), Mueller Industries, Inc. (MLI), and DLH Holdings Corp. (DLHC) are three top stocks to add to your growth portfolio.
Elbit Systems Ltd. (ESLT)
Headquartered in Haifa, Israel, ESLT is a technology company operating primarily in the defense and homeland security arenas. The company develops and supplies airborne, land, and naval systems and products for defense, homeland security, and commercial aviation applications. Its activities include military aircraft and helicopter systems, helmet-mounted systems, commercial aviation systems, aerostructures, and crewless aircraft.
On January 3, 2022, ESLT announced that its subsidiary Elbit Systems Emirates Limited won a contract worth $53 million to be performed over five years for supplying Direct Infrared Countermeasures and airborne Electronic Warfare systems for the UAE Air Force’s Airbus A330 Multi-Role Tanker Transport aircraft. ESLT will deliver a multi-turret configuration of the J-MUSIC Self-Protection System along with its Infra-Red based Passive Airborne Warning System, providing high levels of protection and redundancy.
ESLT’s revenues increased 20.2% year-over-year to $1.36 billion for the third quarter ended September 30, 2021. The company’s non-GAAP gross profit increased 22.6% year-over-year to $370.70 million. Also, its non-GAAP net income attributable to its shareholders increased 41.8% year-over-year to $103.10 million. In addition, its non-GAAP EPS attributable to the company’s shareholders came in at $2.33, representing an increase of 42% year-over-year.
ESLT’s revenue has grown at a CAGR of 12.6% over the past three years. The company’s total assets grew at a CAGR of 21.8% over the past three years.
Analysts expect ESLT’s EPS and revenue for fiscal 2021 to increase 47.5% and 12% year-over-year to $7.94 and $5.22 billion, respectively. It surpassed Street EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 54.5% to close the last trading session at $204.90.
ESLT’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Growth and Sentiment and a B grade for Stability. It is ranked first out of 73 stocks in the Air/Defense Services industry. Click here to see the additional ratings of ESLT for Value, Momentum, and Quality.
Mueller Industries, Inc. (MLI)
MLI manufactures copper, brass, aluminum, and plastic products. The company operates through the Piping Systems, Industrial Metals, and Climate segments.
For the fiscal fourth quarter ended December 25, 2021, MLI’s net sales increased 41.5% year-over-year to $956.35 million. The operating income increased 164.8% year-over-year to $172.14 million. The company’s net income attributable to Mueller Industries, Inc. increased 244.8% year-over-year to $125.60 million. Also, its EPS came in at $2.21, representing an increase of 245.3% year-over-year.
MLI’s revenue has grown at a CAGR of 14.5% over the past three years. Also, the company’s levered free cash flow grew at a CAGR of 41.4% over the past three years.
MLI's EPS is expected to increase 12% per annum over the next five years. Its revenue for fiscal 2022 is expected to increase 0.9% year-over-year to $3.80 billion. Over the past six months, the stock has gained 29.6% to close the last trading session at $55.05.
MLI’s POWR Ratings reflect solid prospects. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Growth and a B grade for Momentum and Quality. Within the B-rated Industrial – Manufacturing industry, it is ranked first out of 39 stocks. To see the other ratings of MLI for Value, Stability, and Sentiment, click here.
DLH Holdings Corp. (DLHC)
DLHC is a full-service provider of technology-enabled health and human services. The company is focused on three market areas, including Defense and Veterans Health Solutions, Human Solutions and Services, and Public Health and Life Sciences. It provides domain-specific expertise, industry best practices, and innovations to customers across various markets, such as secure data analytics and case management.
On October 14, 2021, DLHC announced that it was awarded the contract to provide experienced medical personnel to support COVID-19 community testing and collection, vaccination, and monoclonal antibody therapy throughout Alaska. CEO of DLHC Zach Parker said, "Our company continues to utilize its healthcare delivery expertise in support of the national response to COVID-19."
DLHC’s revenue for the fiscal first quarter ended December 31, 2021, increased 163.9% year-over-year to $152.80 million. The company's income from operations increased 211.1% year-over-year to $11.21 million. Also, its adjusted EBITDA increased 131.7% year-over-year to $13.20 million. In addition, its EPS came in at $0.55, representing an increase of 323% year-over-year.
DLHC’s revenue and net income have grown at a CAGR of 35.6% and 36.2% over the past three years, respectively. Also, its EBITDA has grown at a CAGR of 39.5% over the past three years.
Analysts expect DLHC’s EPS and revenue for fiscal 2022 to increase 78.7% and 53.6% year-over-year to $1.34 and $378 million, respectively. It surpassed consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 57.3% to close the last trading session at $16.04.
DLHC's strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Growth, Value, and Sentiment and a B grade for Quality. Within the B-rated Industrial – Services industry, it is ranked #2 out of 88 stocks. Click here to see the other ratings of DLHC for Momentum and Stability.
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ESLT shares were trading at $210.32 per share on Tuesday morning, up $4.66 (+2.27%). Year-to-date, ESLT has gained 20.78%, versus a -10.81% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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