Amidst the banking sector turmoil, Fed Chair Jerome Powell indicated that the central bank might be nearing the end of its rate-hiking cycle, raising optimism.
So, quality growth stocks Visa Inc. (V), Adobe Inc. (ADBE), and Sociedad Química y Minera de Chile S.A. (SQM) could be worth buying now. These stocks have strong growth potential and profitability.
The market’s sentiments have shifted recently as investors turned away from worries about falling revenue growth rates and increasing technology industry layoffs.
Wall Street is now concerned about the banking sector due to the recent banking failures this month, causing widespread panic in the financial sector.
Moreover, amidst concerns that the global banking sector’s tumult will continue due to rising interest rates, investors and analysts are calling for coordinated interventions from central banks to restore financial stability.
Erik Nielsen, group chief economics advisor at UniCredit in London, suggests that central banks should make a joint statement to prevent further rate hikes until stability returns to the financial markets.
Take a detailed look at the stocks mentioned above:
Visa Inc. (V)
V is a global payments technology enterprise that operates VisaNet, a transaction processing network facilitating the authorization, clearing, and settlement of payment transactions worldwide. The company also offers Cybersource, a payment management platform, and risk and identity solutions.
V’s trailing-12-month gross profit margin of 97.58% is 63.3% higher than the 59.75% industry average. Its trailing-12-month EBIT margin of 67.14% is 203% higher than the 22.16% industry average.
During the first quarter of fiscal 2023 that ended December 31, 2022, V’s net revenues increased 12.4% year-over-year to $7.94 billion. Its operating income rose 6.6% from the year-ago quarter to $5.09 billion.
Moreover, the company’s non-GAAP net income and EPS grew 17.4% and 20.4% year-over-year to $4.58 billion and $2.18, respectively.
V's revenue and EBITDA have increased at CAGRs of 8.7% and 8.8% over the past three years. Its net income and EPS have increased at CAGRs of 7% and 9.3% over the past three years.
Analysts expect V’s revenue to increase 7.9% year-over-year to $7.76 billion for the fiscal second quarter ending March 2023. The company’s EPS for the current quarter is expected to rise 10.3% year-over-year to $1.98. Moreover, V surpassed its consensus revenue and EPS estimates in all four trailing quarters, which is impressive.
The stock has gained 20.2% over the past six months to close the last trading session at $221.04.
V’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
V has an A grade for Quality and a B for Stability and Sentiment. It ranks #5 in the 46-stock Consumer Financial Services industry.
In addition to the POWR Ratings I’ve just highlighted, you can see V’s Value, Growth, and Momentum ratings here.
Adobe Inc. (ADBE)
ADBE operates as a diversified software company worldwide. It operates through three segments: Digital Media; Digital Experience; and Publishing and Advertising.
On March 23, ADBE and BlackBerry Limited (BB) announced that they had partnered to deliver a secure forms solution for mobile. The software solution, which combines BlackBerry UEM and Adobe Experience Manager Forms, is designed for popular mobile device platforms and meets the rigorous security standards required by regulated industries.
On March 22, ADBE and Prada Group announced an expanded partnership to offer real-time personalization and revenue growth, boosting the global luxury group’s consumer experiences across all digital and physical retail platforms. This ensures that they can engage and connect with each customer.
ADBE’s trailing-12-month net income margin of 26.32% is 873.7% higher than the 2.70% industry average. Its 37.34 trailing-12-month EBITDA margin is 873.7% higher than the 2.70% industry average.
ADBE’s total revenue increased 9.2% year-over-year to $4.66 billion for the first quarter that ended March 3, 2023. Its gross profit increased 9% year-over-year to $4.09 billion. Also, its EPS rose 1.9% year-over-year to $2.71.
ADBE’s revenue and EBITDA have increased at CAGRs of 15.6% and 17.9% over the past three years. Its net income and EPS have increased at CAGRs of 13.6% and 15.4% over the past three years.
Street expects ADBE’s revenue to increase 8.8% year-over-year to $4.77 billion in the fiscal second quarter ending May 2023. Its EPS is estimated to increase 13.1% year-over-year to $3.79 in the same quarter. It surpassed EPS estimates in each of the four trailing quarters.
The stock has gained 31.8% over the past six months to close the last trading session at $374.96.
It is no surprise that ADBE has an overall rating of B, which translates to a Buy in our POWR Ratings system.
The stock has an A grade for Quality and a B for Sentiment. It is ranked #23 in the 135-stock Software - Application industry.
To access the additional ADBE ratings for Value, Growth, Momentum, and Stability, click here.
Sociedad Química y Minera de Chile S.A. (SQM)
Headquartered in Chile, SQM produces and distributes specialty plant nutrients, iodine and its derivatives, lithium and its derivatives, potassium chloride and sulfate, industrial chemicals, and other products and services.
SQM’s trailing-12-month net income margin of 36.47% is 380.5% higher than the 7.59% industry average. Its 29.32% trailing-12-month levered FCF margin is 556.7% higher than the 4.46% industry average.
SQM’s revenues increased 189% year-over-year to $3.13 billion for the fourth quarter that ended December 31, 2022. Its gross profit rose 202.5% year-over-year to $1.64 billion. Its adjusted EBITDA grew 198% from the prior-year quarter to $1.67 billion.
Additionally, net income rose 257.9% year-over-year to $1.15 billion, while its EPS increased 256.6% year-over-year to $4.03.
SQM’s revenue and EBITDA have increased at CAGRs of 76.6% and 109.4% over the past three years. Its net income and EPS have increased at CAGRs of 141.3% and 134.8% over the past three years.
SQM’s revenue is expected to rise 32.1% year-over-year to $2.67 billion in the current quarter ending March 2023. In addition, it surpassed revenue estimates in each of the trailing quarters.
The stock has gained 4.5% over the past five days to close the last trading session at $80.96
SQM’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, translating to a Buy in our proprietary rating system.
It has an A grade for Quality and a B for Growth. SQM is ranked #18 out of 83 stocks in the B-rated Chemicals industry.
Click here to check additional ratings for SQM (Value, Momentum, Stability, and Sentiment).
What To Do Next?
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V shares were unchanged in premarket trading Monday. Year-to-date, V has gained 6.60%, versus a 3.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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