Based on the inflation data released by the Bureau of Labor Statistics, the consumer price index increased 8.3% in April, exceeding the Dow Jones estimate of 8.1%. Fed Chair Powell on Wednesday indicated increasing the interest rates aggressively to bring down high inflation. This, coupled with concerns over the Russia-Ukraine war and a contracting U.S. GDP rate in the first quarter of 2022, has resulted in a massive sell-off in growth stocks over the past few weeks.
Despite the risk-off environment, a few growth companies have maintained strong balance sheets, cash flows, and positive analyst sentiments. Furthermore, the recent market downturn has a potential upside because it provides an attractive opportunity to buy financially solid growth stocks at bargain prices.
Against this backdrop, adding quality growth stocks PTC Inc. (PTC) and ON Semiconductor Corporation (ON) to one’s portfolio could be profitable.
PTC Inc. (PTC)
PTC in Needham, Mass., is a software and services company that operates in the Americas, Europe, and the Asia Pacific. The company operates through two segments: Software Products; and Professional Services. It offers the ThingWorx platform that enables enterprises to transform every aspect of their business digitally. In addition, it provides Onshape, a software-as-a-service product development platform, Arena, a PLM solution, Creo, a 3D CAD technology, and Windchill, a product lifestyle management solution.
This month, PTC launched the ninth version of Creo® market-leading computer-aided design (CAD) software. Creo 9 allows engineers to deliver the best product designs and encourages innovation with emerging technologies. It brings updates, including usability and productivity, powerful simulation and generative design capabilities, model-based definition (MBD) and detailing improvements, and advances in additive and subtractive manufacturing. This new launch might boost the company’s profitability.
In the same month, PTC completed its acquisition of Inland Software. This acquisition might broaden PTC’s Application Lifestyle Management (ALM) footprint across safety-critical and regulated industries, including automotive, life sciences, aerospace and defense, and consumer electronics.
In its fiscal year 2022 second quarter, ended March 31, 2022, PTC's net revenue increased 9.4% year-over-year to $505.23 million, while its non-GAAP gross margin improved 9.9% from its year-ago value to $422.08 million. Its non-GAAP operating income grew 24.3% year-over-year to $213.82 million. The company’s non-GAAP net income and non-GAAP earnings per share came in at $163.48 million and $1.39, respectively, registering an increase of 27.9% and 28.7% from the prior-year period.
The company has an impressive growth history also. Its revenue and net income have improved at CAGRs of 14.5% and 297.2%, respectively, over the past three years. Its EBITDA rose at a 53.5% CAGR over the past three years, while its EPS has increased at a 306.9% CAGR over the past three years.
Analysts expect PTC’s EPS to grow 28.1% year-over-year to $1.06 for its fiscal 2022 third quarter, ending June 30, 2022. The $474.11 million consensus revenue estimate for the current quarter represents an 8.8% rise from the prior-year period. It is no surprise that the company has topped the consensus EPS and revenue estimates in three of the trailing four quarters.
The stock has gained 8.5% in price over the past month and closed yesterday's trading session at $109.51.
PTC's POWR Ratings reflect this promising outlook. It has an overall B grade, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
PTC has a B grade for Growth, Sentiment, and Quality. Within the Software - Application industry, it is ranked #14 of 155 stocks. To see additional POWR Ratings (Value, Momentum, and Stability) for PTC, click here.
Click here to check out our Software Industry Report for 2022
ON Semiconductor Corporation (ON)
Phoenix, Ariz.-based ON offers intelligent sensing and power solutions worldwide. The company operates through three segments: the Power Solutions Group; the Advanced Solutions Group; and the Intelligent Sensing Group. It provides analog, discrete, module, and integrated semiconductor products that perform various application functions. ON also designs and develops integrated analog, mixed-signal, advanced logic, application-specific standard products, integrated power solutions, and foundry and design services.
This month, ON announced that NIO Inc., a global automotive innovator, selected ON's latest VE-Trac™ Direct silicon carbide power modules for its next-generation electric vehicles (EVs). The SiC-based power modules enable longer range, higher efficiency, and faster acceleration for EVs. This collaboration is expected to boost the company’s revenues.
ON's revenue increased 31.3% year-over-year to $1.95 billion in its fiscal year 2022 first quarter, which ended April 1, 2022. Its non-GAAP gross profit rose 84.4% year-over-year to $961.30 million. Its non-GAAP operating income improved 235.1% year-over-year to $658.50 million. Its non-GAAP net income attributable to ON and non-GAAP earnings per share came in at $538.50 million and $1.22, respectively, registering an increase of 255.9% and 248.6% year-over-year.
The company’s financials have grown substantially over the past three years. ON’s revenue and net income have risen at CAGRs of 7% and 34.1%, respectively, over the past three years. Its EPS grew at a 32.4% CAGR, while its levered free cash flow has improved at a 26.8% CAGR over the past three years. In addition, its EBITDA rose at a 21.1% CAGR over the past three years.
The $2.02 billion consensus revenue estimate for its fiscal 2022 second quarter, ending June 2022, represents a 20.8% rise from the same period last year. The $1.26 consensus EPS estimate for the ongoing quarter indicates a 100% year-over-year growth. The company has an impressive revenue and earnings history; it has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 49.7% in price to close yesterday’s trading session at $56.07.
ON’s POWR Ratings reflect this strong outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system.
ON has a grade of A for Growth and B for Sentiment. Within the B-rated Semiconductor & Wireless Chip industry, it is ranked #16 of 95 stocks. To see additional POWR Ratings (Momentum, Stability, Quality, and Value) for ON, click here.
Click here to checkout our Semiconductor Industry Report for 2022
What To Do Next?
If you would like to see more top growth stocks, then you should check out our free special report:
What makes them "MUST OWN"?
All 9 picks have strong fundamentals and are experiencing tremendous momentum. They also contain a winning blend of growth and value attributes that generates a catalyst for serious outperformance.
Even more important, each recently earned a Buy rating from our coveted POWR Ratings system where the A rated stocks have gained +48.22% a year.
Click below now to see these top performing stocks with exciting growth prospects:
PTC shares were trading at $110.12 per share on Friday afternoon, up $0.61 (+0.56%). Year-to-date, PTC has declined -9.10%, versus a -19.21% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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