Amid rising uncertainties surrounding the sustainability of the market’s momentum, owing to the surge in COVID-19 cases driven by the new Delta variant, investors are shifting their focus to stocks that can offer sustainable returns over the long run. Among other strategies, betting on fundamentally sound growth stocks could be a way to dodge short-term market fluctuations.
Growth stocks, which underperformed versus their value counterparts from January through May of this year, have bounced back lately, which is evident in the S&P SPDR 500 Growth ETF’s (SPYG) 5.3% return over the past month.
Because analysts expect the bearish market sentiment to be short-lived, we think The TJX Companies (TJX) and Boston Scientific Corporation (BSX), which possess solid growth attributes, could be solid bets now.
The TJX Companies, Inc. (TJX)
TJX is a global off-price clothing and home fashions retailer that is based in Framingham, Mass. Marmaxx, HomeGoods, TJX Canada, and TJX International are the four business segments through which the company operates. It sells home basics, furniture, rugs, lighting products, and other home decor accessories and merchandise.
In May, the company’s board of directors reinstated its share repurchase program, under which TJX will repurchase approximately $1.0 - $1.25 billion of its stock during its fiscal year ending January 29, 2022. The decision demonstrates the company's strong business outlook and ability to maintain a solid balance sheet.
During the first quarter, ended May 1, 2021, TJX’s net sales increased 128.8% year-over-year to $10.09 billion. Its net income came in at $533.93 million for this period, compared to a $887.49 million net loss in the first quarter of 2020. The company’s EPS was $0.44, compared to a $0.74 loss per share in the prior-year period. Also, TJX’s net sales under the Home Goods segment increased 181.8% from the prior-year quarter to $2.14 billion. Its revenue and levered free cash flow have increased at CAGRs of 3.6% over the past five years and 52.5% over the past three years, respectively.
A $2.58 consensus EPS estimate for the current year represents a 732.3% increase year-over-year. The $46.03 billion consensus revenue estimate for the current year represents a 43.2% increase from the same period last year. The stock has gained 25.9% over the past year and 20.1% over the past nine months.
TJX's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
TJX is also rated an A grade for Growth, and a B for Quality and Sentiment. Within the A-rated Fashion & Luxury industry, it is ranked #17 of 66 stocks.
To see additional POWR Ratings for Momentum, Stability, and Value for TJX, click here.
Click here to checkout our Retail Industry Report for 2021
Boston Scientific Corporation (BSX)
BSX in Marlborough, Mass., is a medical device developer, manufacturer, and marketer that serves various interventional medical specialties. The company operates through three business segments: Cardiovascular, Rhythm Management, and MedSurg.
This month, BSX announced positive 24-month results from the PINNACLE FLX clinical study, which evaluated the safety and effectiveness of the next-generation WATCHMAN FLXTM Left Atrial Appendage Closure (LAAC) device for patients with non-valvular atrial fibrillation. According to BSX , the device will allow for improved anchoring, quicker, more efficient closure of the LAAC, and compatibility with more complicated anatomies, resulting in a safe, effective, and durable option for patients.
For the first quarter, ending March 31, 2021, BSX reported $2.75 billion in net sales, representing an 8.2%year-over-year increase. Its operating income grew 153.4% from its year-ago value to $370 million, while its net income surged year-over-year to $327 million over this period. The company’s gross profit increased 7% year-over-year to $1.86 billion. And its EPS and net income have grown at CAGRs of 20.5% and 30.3%, respectively, over the past three years.
BSX is expected to see 18.5% revenue growth for the current year. Its EPS is estimated to increase 64.6% year-over-year to $1.58 in its fiscal year 2021. Over the past year, BSX’s stock has gained 13.5%. Furthermore, it has gained 21.1% so far this year.
BSX's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Growth, and a B for Stability. In the Medical – Devices & Equipment industry, it is ranked #46 of 186 stocks.
In total, we rate BSX on eight different levels. Beyond what we've stated above, we have also given BSX grades for Sentiment, Value, Quality, and Momentum. Get all the BSX ratings here.
Note that BSX is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
Click here to checkout our Healthcare Sector Report for 2021
TJX shares were trading at $68.00 per share on Friday morning, up $0.73 (+1.09%). Year-to-date, TJX has gained 0.31%, versus a 18.16% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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