Market investing is all about growth – finding growth-oriented stocks, and growing the initial investment. The key, of course, is identifying the stocks that are going to climb higher. While past performance is no guarantee of future returns – an old cliché of investing – it’s natural to look at how stocks have performed before you put your money down.
We’ve used TipRanks’ Stock Screener to home in on three growth stocks – names that exceeded 90% growth in 2019, and that show an upside potential of 20% or more in the coming months. These are companies that outperformed the broader markets, and are considered likely to continue outperforming. In short, this is where to go to watch your investments grow.
Target Corporation (TGT)
We’ll start with an established name in retail, Target. To put it simply, this company performed quite spectacularly in 2019, gaining 98% over the course of the year. For comparison, the S&P 500 grew by 29%, and Target’s chief competitors, Walmart and Costco, rose by 20% and 58%, respectively.
The outperformance was clear from the quarterly reports, too. Target met or exceeded expectations in the first three quarters of the year, with Q3 showing a 15% earnings beat. The outlook for Q4 is also upbeat, with management predicting that full year same-store sales will increase by over 3%.
All the news isn’t rosy, however, as the holiday season was weaker than hoped. TGT shares have slipped 14% so far in January, as the Christmas shopping results have come in. Wall Street, however, views this as an opportunity – TGT is still considered a strong growth name, and the pullback makes the stock a better bargain.
This point of view was set out by 5-star analyst Christopher Horvers, of J.P. Morgan, in a recent note on TGT. He said that the decline in share price “due to disappointing holiday comps represents a key buying opportunity. The stock offers the best near- and medium-term risk-reward in the [retail] space…”
With this in mind, Horvers raised his price target to $144, a 44% boost, to back up his Buy rating. At its new level, his price target implies a possible upside of 30% to TGT.
Overall, Target stock has a Moderate Buy from the analyst consensus, based on 14 Buy ratings and 7 Holds. Shares are selling for $110.74, and the $138.22 average price target suggests an upside potential of 25% to the stock.
New Oriental Education & Technology Group, Inc. (EDU)
There is a strong industry of private educational and tutoring companies in China. With a market cap of $19 billion, New Oriental is one of the largest such companies, offering services in foreign language training, assessment test and college prep courses, and tutoring for primary and secondary level students. In addition, the company develops and distributes educational software as well as other technology.
Of the stocks on this list, EDU showed the highest 2019 growth rate – a whopping 121%. Not to mention recent quarterly numbers show that the company is still on an upward trajectory. In January, EDU reported results for fiscal Q2. EPS, at 36 cents, was 57% higher than anticipated, but even better, was up 147% year-over-year. Revenues, at $785.2 million, were up 32% year-over-year. Altogether, it was a superb performance, driven by large gains in enrollment.
Nomura analyst Jessie Xu sees a big year ahead for EDU. He writes, “We expect total revenue to increase by 26% y-y in FY20F, primarily driven by the strong revenue growth in K12 business (50%-plus year-over-year). This should be well supported by the K12 enrollment momentum (50%-plus year-over-year), in our view. We forecast U-Can and POP Kids enrollment to grow by 44% and 57% year-over-year in FY20F…”
Xu gives the stock a Buy rating with a new $158 price target, up from $135, indicating confidence in a 30% upside.
EDU gets a unanimous Strong Buy from the analyst consensus, with 4 recent Buy ratings. The $155.99 average price target suggests an upside potential of 28% from the current $121.55 trading price.
Constellium SE (CSTM)
Heavy industry sometimes gets dismissed in the information economy, but it can’t be forgotten. After all, raw materials must be acquired, and infrastructure must be built. Paris-based Constellium inhabits the industrial world, as a producer and provider of aluminum products to the aerospace, automotive, defense, industrial, packaging, and transportation sectors. The company is a leader in the development of advanced aluminum alloys, and its clients include Airbus, Audi, BMW, Boeing, and Ford.
Constellium saw over 5.7 billion Euros in revenue in fiscal 2018, while in 2019, the company saw its stock price grow by an impressive 91%. CSTM is expected to report Q4 earnings on March 11, and the consensus is for strong sequential growth – EPS of 6 cents, on sales of $1.4 billion. This will be a tonic for the company after a disappointing Q3.
Looking ahead at the coming year, Northland’s Gus Richard is bullish on CSTM. The 5-star analyst writes, “We see higher demand for Constellium’s aluminum products given shifts in beverage packaging and auto markets and also sees an opportunity for price increases as demand increases…”
In line with his optimism, Richard opened coverage of the stock at a Buy rating, with a price target of $19, suggesting an upside potential of 67%.
Richard’s review is the most recent on CSTM, making the consensus rating a Moderate Buy. The company shows a strong upside potential, and shares are currently a bargain at $11.36.
