The gradual decline in inflation and decelerating wage growth might prompt the Fed to slow the pace of rate hikes this year, which might help growth stocks to stage a recovery. So, fundamentally strong growth stocks Salesforce (CRM), HF Sinclair (DINO), and Box (BOX), which look poised to soar in the near term, might be ideal buys now. Keep reading.
December’s Consumer Price Index (CPI) fell 0.1% for the month, in line with the Dow Jones estimate, marking the largest month-over-month decrease since April 2020. Moreover, the Labor Department reported that employers added 223,000 jobs in December 2022, reflecting a slowdown from the pace of job creation seen earlier in the year.
Also, average hourly pay, which had been increasing at an annual rate of 5% in September, fell to 4.6% in the month.
The sky-high inflation and the Fed’s aggressive interest rate hikes to tame it have affected growth stocks significantly last year. However, the easing inflationary pressures and declining wage growth signals that the Fed’s rate hikes are having their intended effect, which might prompt the Fed to slow its rate hike pace.
The Fed is widely anticipated to deliver a 0.25 bps rate hike in its next meeting, a step back from a 0.50 bps hike last month.
Furthermore, as per Fundstrat Global Advisors co-founder Tom Lee, US stocks will surge back toward record highs in 2023 once the Federal Reserve signals that it’ll ease up on its monetary-tightening campaign. Lee also said that he expects the S&P 500 to steadily climb to hit 4,800 points this year.
Given this backdrop, fundamentally strong growth stocks Salesforce, Inc. (CRM), HF Sinclair Corporation (DINO), and Box, Inc. (BOX) might be ideal buys for solid returns this year.
Salesforce, Inc. (CRM)
CRM provides customer relationship management technology that brings companies and customers together worldwide. The company’s service offerings include Sales, Service, Marketing, and Commerce. The company provides its services through direct sales, consulting firms, systems integrators, and other partners.
The company’s forward Price/Book multiple of 2.79 is 32.8% lower than the industry average of 4.15.
During the third quarter that ended October 31, 2022, CRM’s total revenues increased 14.2% year-over-year to $7.84 billion. The company’s gross profit increased 14.5% year-over-year to $5.75 billion, and non-GAAP income from operations increased 30.9% year-over-year to $1.78 billion.
The consensus EPS estimate of $1.36 for the fiscal fourth quarter ending January 2023 indicates a 62.3% improvement year-over-year. The consensus revenue of $8 billion for the same quarter represents a 9.2% year-over-year growth. CRM has an impressive earnings surprise history as it has surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.
Also, the company’s revenue and levered free cash flow have grown at a CAGR of 24.1% and 21.8%, respectively, over the past three years.
The stock has gained 26.7% over the past month to close the last trading session at $167.97.
CRM’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to 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 a B for Sentiment. Within the 138-stock Software – Application industry, it is ranked #27.
Beyond the POWR Ratings just highlighted, you can access additional CRM grades for Value, Momentum, Stability, and Quality here.
HF Sinclair Corporation (DINO)
DINO is an independent petroleum refiner that produces and markets high-value light products such as gasoline, diesel fuel, jet fuel, renewable diesel, and other specialty products.
Its forward non-GAAP P/E of 3.80x is 53.8% lower than the industry average of 8.23x. Its 0.27 forward non-GAAP PEG multiple is 59.6% lower than the industry average of 0.68.
The company pays $1.20 annually as dividends, which translates to a yield of 2.81% at the current price. Its four-year average dividend yield is 2.99%.
DINO’s sales and other revenues grew 126.2% year-over-year to $10.60 billion for the third quarter that ended September 30, 2022. Its adjusted EBITDA increased 267.9% year-over-year to $1.50 billion. The company’s adjusted net income increased 368.2% year-over-year to $982.90 million, while its adjusted EPS rose 257.8% year-over-year to $4.58.
Street expects DINO’s revenue to increase 106.6% year-over-year to $37.99 billion for the fiscal year 2022. Its EPS is expected to rise 789% year-over-year to $14.96 for the same year. The company has surpassed the consensus revenue estimates in all of the trailing four quarters.
Moreover, the company’s net income and EPS have grown at a CAGR of 39.1% and 33%, respectively, over the past three years.
The stock has gained 9.7% over the past month and 61.8% over the past year to close the last trading session at $56.90.
It is no surprise that DINO has an overall rating of B, equating to a Buy in our POWR Ratings system.
It has a grade of A for Growth and Momentum and a B for Quality. It is ranked #10 among 93 stocks in the B-rated Energy – Oil & Gas industry.
In addition to the grades stated above, we’ve also rated DINO for Value, Sentiment, and Stability. Get all DINO ratings here.
Box, Inc. (BOX)
BOX provides a cloud content management platform that enables organizations of various sizes to manage and share their content from anywhere on any device.
On January 10, BOX announced that BETC, a global communications, marketing, and advertising agency, have chosen BOX’s secure content management capabilities to power collaboration and accelerate processes around content management.
Sebastien Marotte, President of EMEA at BOX, said, “We’re delighted to support BETC in powering the next generation of creative content for their prestigious clients. We look forward to our continued partnership as BETC continues to expand its use of Box and develop its Content Cloud journey.”
In terms of forward non-GAAP PEG, BOX is currently trading at 1.36x, which is 14.8% lower than the industry average of 1.60x. Its forward Price/Cash flow multiple of 16.32 is 11.2% lower than the industry average of 18.37.
BOX’s revenue increased 11.6% year-over-year to $249.95 million in the third quarter that ended September 30, 2022. Its gross profit rose 15.2% year-over-year to $185.46 million. Also, its EPS came in at $0.03, compared to a loss per share of $0.12 in the year-ago period.
Analysts expect BOX’s revenue to rise 9.9% year-over-year to $256.48 million in the fiscal fourth quarter ended January 2023. Its EPS is estimated to grow 42.6% year-over-year to $0.34 in the same quarter.
Its revenue and levered free cash flow have grown at a CAGR of 15.1% and 29.1% over the past five years.
The stock has gained 22.4% over the past year to close the last trading session at $31.99. It has gained 10.1% over the past month.
BOX’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to a Buy in our proprietary rating system.
It also has an A grade for Growth and Quality and a B for Value. BOX is ranked #6 among the 78 stocks in the Technology – Services industry.
Click here for the additional POWR Ratings for Stability, Momentum, and Sentiment for BOX.
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CRM shares were trading at $168.63 per share on Wednesday morning, up $0.66 (+0.39%). Year-to-date, CRM has gained 27.18%, versus a 5.98% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor’s degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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