3 Growth Stocks Backing Up High Valuations With Impressive Earnings
The most successful investors use earnings season as an opportunity to identify future leaders in the market and assess what companies are worth holding on to. These reports can be huge catalysts for the price of a stock and provide us with critical information about how a business is performing and what kind of numbers it might put up in the future. Here’s a pro tip – instead of trying to guess what the reaction to a specific company’s report will be by adding a position before the release, it makes a lot more sense to take a wait & see approach and add shares after the print.
This is can be a particularly effective strategy for growth stocks since these companies are expected to impress quarter after quarter in order to justify their valuations. That’s why we often see growth companies get brutally punished for failing to exceed expectations or take off and rally on surprisingly good numbers.
If you are trying to identify some quality growth stocks to buy after reporting impressive earnings, here are 3 names to consider:
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Lending Club (NYSE: LC)
This fintech company has created America’s largest lending marketplace connecting borrowers and investors and is helping consumers to take control of their finances with convenient personal loans. Lending Club has already helped over 3 million members to obtain over $60 billion in personal loans. The company has some of the lowest eligibility requirements on the market, making it easy for people to obtain the financing that they need. Lending Club also provides commercial lending products and services, including commercial and industrial loans, commercial real estate loans, small business loans, and equipment loans and leases.
The stock is hitting new all-time highs after an outstanding Q3, including record revenue of $246.2 million, up 20% year-over-year, and record net income of $27.2 million, up 190% sequentially. There’s a lot to like about how the company is using artificial intelligence to help consumers get lower interest rates, and the company’s 2020 acquisition of Radius Bank is clearly already translating to faster earnings growth. Keep an eye on this stock in the coming weeks, as it could be a strong performer this quarter after such a fantastic report.
Next up is ServiceNow, a cloud software company that has developed a product that appeals to almost any enterprise on the planet. ServiceNow offers information technology services management software that is used to manage and automate business processes and their workflows, which means it can help companies to run more efficiently and achieve greater productivity. ServiceNow is very appealing from a growth standpoint since so many companies today are migrating to the cloud and pursuing digital transformations. The company can help them make those transitions easier, and once a client is on board with the software the company can cross-sell other solutions like HR service delivery and customer service.
ServiceNow currently serves over 80% of the Fortune 500, which tells investors just how strong its software is. The company just reported Q3 results that saw subscription revenues reach $1.43 billion, up 31% year-over-year and topping consensus estimates. Investors want to see continued subscription growth for companies like this, as it means that ServiceNow is adding to its recurring revenue base. After multiple analyst upgrades, the stock is trading near all-time highs, which means a breakout could be on the cards in the coming sessions.
Another leader in the software growth space that is worth checking out after its latest earnings release is Atlassian Corporation. The company offers a variety of team collaboration products that make it easier for workers to handle projects and track their work virtually. With so many people working remotely now, it’s easy to recognize why this type of software is so valuable to companies in the digital age. Some of Atlassian’s most popular tools like Jira and Trello are used by thousands of teams worldwide and have helped the company to attract high-profile clients like Nasa, eBay, Cisco, and Airbnb.
Atlassian just reported another stellar quarter including Q1 revenue growth of 34% to $614 million and quarterly subscription revenue of $435 million, up 57% year-over-year. It’s clear that the company continues to attract new clients with its innovative software, as Atlassian added 11,746 new customers last quarter, up 36% year-over-year. While this software growth stock is not cheap by any means, the company is putting up the growth numbers to back up its valuation and has clearly created something unique, which is why it’s a solid pick post-earnings.