Investing in companies and growth stocks with explosive earnings potential is an excellent idea. Earnings represent a firm’s net profit after expenses. In other words, it is what’s left over after everything has been purchased. Consistent growth in earnings indicates a company’s ability to generate profits efficiently and sustainably over time.
Explosive earnings growth indicates a firm may be entering into a period of sustained growth. Investors know that such periods of growth create massive rewards for shareholders. In that sense, explosive earnings act like a cash machine for investors.
Companies also reinvest earnings in an effort to create more growth, creating a virtuous cycle if executed well. Earnings growth instills confidence in investors. It indicates that the company’s business model is working, its products or services are in demand, and its management team is making sound strategic decisions.
All of those factors suggest that the stocks below–which are in explosive growth territory–make excellent investments currently.
Growth Stocks With Potential: Advanced Micro Devices (AMD)
Advanced Micro Devices (NASDAQ:AMD) stock is down momentarily which arguably presents an opportunity to pounce. AI stocks are wavering as a spate of positive news and concerning changes loom. AMD shares have fallen to $155 and now may be the time to move.
The reason to move is that AMD is in earnings growth mode. The firm provided $0.53 of earnings per share in 2023 overall. This year that figure is expected to increase by 570% to $3.54. AMD lost $139 million during the first quarter of 2023. It posted $123 million in net income in Q1 this year. That’s a 188% increase on a year-over-year basis.
The strong turnaround is a result of record data center sales of $2.3 billion in the period. AMD is bolstered by recent strong earnings from Taiwan Semiconductor Manufacturing (NYSE:TSM) that bode well for the AI sector overall in H2. It should continue to print cash as a result.
Salesforce (CRM)
Salesforce (NYSE:CRM) is another cash machine stock with explosive earnings potential for shareholders.
The company’s first-quarter results indicated that 2024 is likely to be an exceptional year for the leading force in customer relationship management. A lot of that has to do with AI – which we’ll get to – but let’s start with the numbers.
Net income jumped by 44% at Salesforce during the first quarter and per share net income increased to $2.44. That’s largely in line with the $10 of EPS expected from the stock in 2024. That figure itself represents a 138% increase over 2023 results.
Revenue grew by 11% in Q1. Part of the excitement surrounding Salesforce is that it is ‘the world’s #1 AI CRM’. The company promises to help enterprises of all sizes leverage AI to better connect with their customers moving forward. Shares are priced more than $40 below their consensus price at $247 so now is a good time to consider establishing a position.
ServiceNow (NOW)
ServiceNow (NYSE:NOW) is an automation software firm with explosive growth potential partially attributable to its earnings growth.
Potential investors simply need to look at forecast EPS growth this year and beyond in order to understand why. Furthermore, ServiceNow exceeded Wall Street’s expectations in Q1 with earnings and sales growth above predictions. ServiceNow reported $2.6 billion in overall revenues in the first quarter.
What’s particularly interesting – and what bodes well for earnings – is that the company has $8.45 billion in performance obligations over the next 12 months. That means the firm is owed $8.45 billion over that period.
The company is doing particularly well in relation to artificial intelligence. Its AI product Now Assist is responsible for the largest boost to the annual contract value of any new product launch. ServiceNow continues to emerge as one of the more intriguing AI plays. Its earnings power is impressive and the AI angle makes it that much more so. Do yourself a favor and grab these growth stocks.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
