Our topic for today is which best growth stocks to add to a long-term portfolio. Many Wall Street darlings have come under significant pressure lately and, therefore, present better buying opportunities compared to January.
Growth companies come up with innovative products or services that add to their market share. Thus, their share values typically appreciate more than the market or their industrial averages.
However, when the market turns down, growth stocks are affected worse. This is partly due to growth companies having betas (β) greater than 1. As most InvestorPlace.com readers know, beta is a measure of the volatility of returns of an asset relative to the broader market.
For example, in the case of Wall Street stocks, we can talk about the β of a stock relative to the S&P 500 index. When a stock has a β value larger than 1, such as 1.25, it is assumed to be 25% more volatile than the S&P 500. Most high-growth names and technology stocks have betas over 1.
The S&P 500 index has fallen 12.8% year-to-date (YTD). However, by comparison, the S&P 500 Growth index has declined even further—down 21.1% so far in 2022. Similarly, the Vanguard Growth Index Fund ETF (NYSEARCA:VUG), which invests in growth names, is also down 23.7% YTD.
Market headwinds will eventually come to an end. Then growth stocks are likely to bounce back faster and stronger than the market in a bullish environment.
With that information, here are three best growth stocks that could appeal to readers looking for robust long term opportunities:
ASML (ASML)
52-week range: $509.55 – $895.93
ASML (NASDAQ:ASML) is a Dutch technology company that develops photolithography systems for the semiconductor industry. It also provides the hardware, software, and services required to manufacture silicon computer chips.
In late April, ASML reported Q1 earnings. Net sales totaled 3.5 billion euros, while basic earnings per share (EPS) came in at 1.73 euros. Cash and equivalents ended the quarter at 4,72 billion euros.
Recently, management announced the installation of the first HMI eSCAN 1100 multibeam system, used to detect defects in silicon wafers. This machine can inspect semiconductor chips 15 times faster than current devices.
As a result, chip manufacturers can increase throughput. Therefore, Wall Street is likely to pay close attention to how the new system will contribute to ASML’s bottom line.
Like most other names in the chip space, ASML stock has lost almost 27% YTD. But it has bounced back 15% after trading to 52-week lows on May 12. Shares are changing hands at 31 times forward earnings and 11.6 times sales. Meanwhile, the 12-month median price forecast for ASML stands at $774.50.
eBay (EBAY)
52-week range: $43.28 – $81.19
eBay (NASDAQ:EBAY) is the leading online marketplace company bringing together worldwide buyers and sellers. Thanks to its competitive positioning, the platform saw significant top line during the pandemic.
Management announced Q1 results on May 4. Revenue came in at $2.5 billion, down 6% on an as-reported basis. Adjusted diluted EPS came in at $1.05. The e-commerce innovator presented solid financial performance, generating $546 million of free cash flow (FCF) from continuing operations.
The marketplace powerhouse is introducing new features to increase market share. For instance, earlier in the year, eBay announced it was launching authentication services for ungraded trading cards purchased on the platform for over $750. This authentication service is now expanded to luxury items in the UK and Australia.
EBAY stock has declined 27% YTD, now trading 13% above its 52-week lows set on May 20. Shares are changing hands at 11.25 times forward earnings and 2.75 times sales, with a dividend yield of 1.82%. In the meantime, the 12-month median price forecast for EBAY is at $55.
Olin (OLN)
52-week range: $39.90 – $66.96
Petrochemical group Olin (NYSE:OLN) manufactures chlor alkali products, vinyls, epoxy, as well as ammunition. For instance, it produces basic chemicals found in plastics. Those InvestorPlace.com readers looking for a robust basic materials investment have been paying attention to this diversified chemical play.
On April 28, Olin released Q1 results. Revenue was $2.46 billion compared to $1.92 billion in the year-ago quarter. Earnings came in at $2.48 per diluted share. A year ago it has been $1.51.
Wall Street noted that epoxy demand has been growing as the production of electric vehicles (EVs) as well as wind turbines is on the rise. Meanwhile, the war in Ukraine has also benefited U.S. petrochemical names like Olin.
The chemical giant has recently announced a partnership with Plug Power (NASDAQ: PLUG), which provides turnkey hydrogen solutions. The two will “create a joint venture (JV) to produce and market green hydrogen to support growing fuel cell demand in the global hydrogen economy.”
OLN stock is trading at its 52-week highs, having gained 20% YTD and 31% over the last 12 months. Moreover, the stock generates a dividend yield of 1.20%. Still, shares look undervalued at 6.6 times forward earnings and 1.1 times sales. Lastly, the 12-month median price forecast for OLN stands at $76.5.
— Tezcan Gecgil
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Source: Investor Place