4 Growth Stocks to Buy – Even at Market Highs

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The bull market still reigns, with the Dow Jones Industrial Average making new highs and the S&P 500 Index maintaining its hold on the 2000 mark.

stocks to buyBut just because the broader averages keep advancing to new levels doesn’t mean the whole market is overbought. There are plenty of growth stocks to buy on expectations that they’ll run even higher. After all, market and economic conditions are ripe for continued growth, with capital expenditures on the rise, interest rates holding steady (for now) and the economy still growing.

You just want to make sure that the growth stocks commanding high multiples have the earnings growth to back them up.

These four growth stocks may come from different industries, but they all have two things in common: They’re on track to deliver double-digit earnings growth over the next year, and they’re certainly targets for investors looking for new stocks to buy.

Growth Stocks to Buy – Netflix (NFLX)

Back to school Tips, NetflixIf you haven’t gotten on the Netflix (NFLX) bandwagon yet, do it before it’s too late.

NFLX stock is trading at an astronomical earnings multiple of 130, which is miles above the average tech price-to-earnings ratio of 26, and its forward P/E of nearly 70 easily trumps the group average of 17. But those valuations are very much justified by expected earnings growth of nearly 70% next year.

Much of that growth should come on the heels of international expansion, where Netflix is only scratching the surface in terms of broadband households. This month, Netflix is pushing into new markets, including Germany and France, where the company is offering U.S. shows and licensing local content.

“We really see that this is an enormous moment in history as On Demand
Internet services are coming to the fore around the world.” – Reed Hastings, Q2 earnings call

Netflix has proven many people wrong, accumulating more than 50 million members as of the second quarter, more than 36 million of which are U.S. members. Unique content such as House of Cards and Orange Is the New Black has resonated with viewers, and now Netflix looking to replicate that success in Europe, making the stock a “buy.”

Growth Stocks to Buy – Ulta Salon (ULTA)

Growth Stocks to Buy - Ulta Salon (ULTA)Retail might not come to mind when seeking growth these days, but have you taken a look at Ulta Salon (ULTA) lately? The beauty retailer is one of the retail sector’s few darlings this year, outperforming the S&P 500 with 23% year-to-date gains.

Yes, ULTA trades at some 30 times earnings, but the company is firing on all cylinders.

In its fiscal second quarter, Ulta’s EPS of 94 cents surpassed both company and consensus estimates. Comparable-store sales, the most closely watched metric for retailers, jumped nearly 10% in the quarter on top of an 8.4% increase in the year-ago period.

The thing to appreciate about Ulta is the fact that less than a year ago, shortly after chief executive Mary Dillon took the reins, the company pulled back on its financial guidance, citing a tepid consumer-spending environment and heavy promotional activity. Now it appears the most recent quarterly performance was more than just a one-time wonder.

“We are raising our outlook for the year and now expect to achieve sales and earnings per share growth in the 20 [percent] range, reflecting our confidence in continued strong market share gains,” CEO Mary Dillon said.

Look to the company’s investor conference on Oct. 15 for more reasons to like ULTA stock.

Growth Stocks to Buy – Constellation Brands (STZ)

Growth Stocks to Buy - Constellation Brands (STZ)There’s a lot of buzz in the alcoholic-beverage sector of late. Much of it has surrounded Anheuser-Busch InBev (BUD) and its potential acquisition of SABMiller (SBMRY), as well as InBev’s more recent outcry against the NFL for the way it handled recent scandals.

But don’t overlook Constellation Brands (STZ), a company whose “beer business is on fire,” according to CEO Rob Sands, and that has been focused on growing organically ever since its 2013 acquisition of Grupo Modelo’s U.S. business from Anheuser-Busch.

Constellation’s beer segment sales rose a better-than-expected 14% in the fiscal first quarter, offsetting relatively flat performance in the wine and spirits division. That prompted Constellation to raise its fiscal 2015 EPS guidance to a range of $4.10 to $4.25 per share from former estimates of $3.95 to $4.15.

Since the Grupo Modelo acquisition, STZ has raised its profile in the high-margin beer business, where it’s expected to generate an operating profit margin of 31 percent this fiscal year. Over the long term, it’s calling for beer margins in the 30 percent to 35 percent range. Constellation is in the midst of a massive Mexican brewery expansion — a $1.1 billion initiative that will increase its capacity twofold to 20 million hectoliters and possibly greater than that.

When it comes to alcoholic-beverage stocks to buy, Constellation Brands takes the crown.

Growth Stocks to Buy – Range Resources (RRC)

Growth Stocks to Buy - Range Resources (RRC)With oil and gas acreage on nearly half a dozen unconventional U.S. shale plays, exploration and production play Range Resources (RRC) is the way to play the U.S. energy renaissance. The stock’s forward P/E of more than 30 is at least double that of several peers, but RRC has delivered on its promises over the past decade. From its 2013 annual report:

“Range has a 10-year track record of consistently meeting or exceeding its targets — a 10 year period with a 20 [percent] production CAGR.”

And that looks set to continue. With proven reserves that have grown nearly threefold since 2009 to 8.2 trillion cubic feet equivalents (Tcfe) at year-end 2013, Range is calling for yearly production growth of 20% to 25% for the foreseeable future. Meanwhile, despite the volatility that’s inherent in commodities like oil and natural gas, RRC has managed to keep its costs low, evidenced by the 38% decline in unit costs since 2008 based on 2014 estimates.

There are many ways to play the U.S. energy boom, but why not do so with the company whose engineers a decade ago discovered the maiden natural gas well in the Marcellus Shale?

Range hasn’t let investors down so far, and there’s no reason to doubt RRC now.

As of this writing, Gerelyn Terzo did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2014/09/growth-stocks-to-buy/.

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