Growth stocks are known for their potential to grow at a rate considerably above the market average. They exhibit critical characteristics like high revenue and earnings growth, long-term investment horizon, and market sentiment sensitivity. While these stocks can provide significant rewards, they carry higher risks, making them suitable for investors with a high-risk tolerance.
Amid the positive economic trends, it could be wise to invest in solid growth stocks Workday, Inc. (WDAY), Veeva Systems Inc. (VEEV), and DocuSign, Inc. (DOCU), with solid earnings potential.
Investing in growth stocks allows investors to accumulate high returns over the long term, as the equities in this category are expected to outpace their peers in earnings and stock performance. With their growth rates exceeding inflation levels, they secure investment value.
According to the U.S. Labor Department report, the Consumer Price Index (CPI), a key inflation indicator, grew 3.3% in May from a year ago, down from 3.4% in April, suggesting that an acceleration of prices observed early this year may have passed. Inflation is slowly and steadily approaching the Federal Reserve’s target of 2%.
Meanwhile, Federal Reserve officials are looking for further confirmation on cooling inflation and any warning signs as they steer toward interest rate cuts by the end of this year. Moreover, Fed Governor Adriana Kugler believes the current stance on monetary policy is "sufficiently restrictive" to ease price pressures without causing a deterioration in the job market.
Furthermore, the World Bank raised the global growth rate by 0.2% points to 2.6% from 2.4% in January for the current year. The international organization said that the global economy will likely do better in 2024 than previously anticipated, approaching the “soft landing” where growth continues and a recession can be avoided.
Given the robust economic outlook, investing in quality growth stocks such as WDAY, VEEV, and SUBCY could be wise for substantial gains.
Workday, Inc. (WDAY)
WDAY offers enterprise cloud applications internationally. Its applications help customers to plan, execute, analyze, and extend to other applications and environments to manage their business and operations.
WDAY’s revenue and EBITDA have grown at respective CAGRs of 19.1% and 50.6% over the past three years. The company’s tangible book value has increased 93.5% over the same timeframe, while its total assets have improved at a CAGR of 22.7%.
On June 12, WDAY announced that Clemson University selected Workday Financial Management, Workday Human Capital Management, and Workday Strategic Sourcing to enable operational excellence, drive digital transformation, and deliver enhanced experiences for its faculty, staff, and student workers.
On June 5, WDAY introduced Built on Workday, a new program to enable partners to build, centrally manage, and market trusted finance and HCM apps to extend the power of the Workday platform. A "build once, distribute to many" approach will allow partners to accelerate their revenue and empower customers to discover new tailored solutions.
Also, on June 3, WDAY launched new AI innovations to make it easier for developers and partners to build intelligent solutions on the Workday platform – and for customers to discover and benefit from those solutions, including AI updates to the company's developer platform, Workday Extend.
On the same day, WDAY and Google Cloud expanded their partnership to bring new generative AI capabilities to enhance how customers build and manage apps on Workday. Under the partnership, WDAY will use Gemini models and Vertex AI to enable gen AI capabilities within Workday Extend, helping customers optimize business performance.
WDAY’s total revenues increased 18.2% year-over-year to $1.99 billion during the first quarter that ended April 30, 2024. Its non-GAAP operating income grew 30.1% year-over-year to $515 million. The company’s net income came in at $107 million for the quarter, and its non-GAAP net income per share rose 30.8% from the prior year’s quarter to $1.74.
Furthermore, the company’s free cash flow increased 33.5% year-over-year to $291 million.
According to the financial outlook, WDAY expects subscription revenue of $1.89 billion, representing growth of approximately 17% during the second quarter. For the fiscal year 2025, the company expects subscription revenue between $7.70 billion and $7.72 billion, representing a growth of approximately 17%.
Analysts expect WDAY’s revenue for the second quarter (ending July 2024) to increase 15.9% year-over-year to $2.07 billion. The company’s EPS for the fiscal year (ending January 2025) is expected to grow 16.5% year-over-year to $6.80. And for the fiscal year 2026, WDAY’s EPS is expected to increase 15.7% year-over-year to $7.87.
Furthermore, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
Shares of WDAY have plunged 4.1% over the past year to close the last trading session at $214.59.
WDAY’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
WDAY has an A grade for Growth and a B for Sentiment and Quality. It is ranked #22 out of 134 stocks in the Software - Application industry.
In addition to the POWR Ratings we’ve stated above, we also have other ratings of WDAY for Value, Momentum, and Stability. Get all WDAY ratings here.
Veeva Systems Inc. (VEEV)
VEEV provides cloud-based software for the life sciences industry. It offers Veeva Commercial Cloud, such as Veeva customer relationship management, Veeva Vault PromoMats, Veeva Vault Medical, Veeva Crossix, Veeva OpenData, Veeva Link, and Veeva Compass.
VEEV’s revenue and EBITDA have grown at respective CAGRs of 16.8% and 7.9% over the past three years. The company’s EBIT has increased 8% over the same timeframe, while its net income and EPS have improved at CAGRs of 10.8% and 10.2%, respectively.
On June 19, VEEV and Vita Global Sciences partnered to modernize clinical data management processes and improve collaboration with key trial stakeholders. With Veeva Vault EDC, the CRO is setting a foundation for study efficiency, and faster study builds, which will deliver a better experience to patients, research sites, and sponsors.
On June 6, VEEV announced that Hangzhou Tigermed Consulting Co., Ltd. selected Veeva Vault EDC as its technology foundation for modern electronic data capture. With Vault EDC, Tigermed would simplify complex data management to achieve faster study builds and mid-study amendments with zero downtime.
On May 16, VEEV unveiled Veeva Vault Basics, a new offering that includes technology, training, and support designed for biotechs. It equips fast-growing companies to deploy industry-leading Veeva Vault applications with zero implementation and maintenance costs.
This innovation bodes well with the company’s portfolio and will drive efficiency, speed, and compliance.
During the first quarter that ended April 30, 2024, VEEV’s total revenues increased 23.6% year-over-year to $650.34 million. Its non-GAAP gross profit grew 31.1% from the year-ago value to $491.78 million. The company’s non-GAAP operating income of $260.87 million indicates growth of 66.2% year-over-year.
Furthermore, the company’s non-GAAP net income came in at $246.95 million and $1.50 per share, up 66.9% and 64.8% from the prior year’s quarter, respectively.
As per the company’s financial guidance, VEEV expects its total revenues to range from $666 to $669 million for the second quarter. It also expects non-GAAP operating income to be between $265 and $267 million and non-GAAP net income per share to be between $1.53 and $1.54 for the same period.
Further, for the fiscal year, the company expects total revenues of $2.70 billion - $2.71 billion. VEEV expects a non-GAAP operating income of $1.07 billion and a non-GAAP net income per share of approximately $6.16.
Street expects VEEV’s revenue for the second quarter (ending July 2024) to increase 13.2% year-over-year to $668.07 million. Its EPS for the next year (ending January 2025) is expected to grow 27.3% year-over-year to $6.16. For the fiscal year 2026, the company’s EPS is expected to grow 10.1% year-over-year to $6.79.
Also, the company topped the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
VEEV’s stock has surged marginally over the past six months to close the last trading session at $183.80.
VEEV’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has an A grade for Growth and Quality. It also has a B grade for Sentiment. Within the Medical - Services industry, VEEV is ranked #14 out of 61 stocks.
Click here to access additional ratings of VEEV for Value, Momentum, and Stability.
DocuSign, Inc. (DOCU)
DOCU offers electronic signature solutions internationally. The company provides an e-signature solution that enables the sending and signing of agreements, Contract Lifecycle Management that automates workflows, Document Generation streamlines the process of generating new, custom agreements, and more.
Over the past three years, DOCU's revenue has grown at a CAGR of 20%. Also, the company's total assets and levered free cash have increased at CAGRs of 8.4% and 19.9%, respectively, over the same period.
On June 4, DOCU announced the upcoming launch of its new Docusign Connector for SAP Ariba solutions, which is a new offering to automate workflows between Docusign CLM and SAP Ariba solutions to help businesses accelerate time to value and eliminate friction in source-to-pay agreement processes.
The new connector will be available globally starting from September. The launch reinforces DOCU’s commitment to its partnership with SAP and its vision to transform agreement processes across the source-to-pay workflow.
On May 31, DOCU acquired Lexion, a leading AI-powered agreement management company. The strategic acquisition strengthens DOCU’s position in Intelligent Agreement Management and introduces new AI-assisted capabilities to the Docusign IAM platform.
For the first quarter that ended April 30, 2024, DOCU’s total revenue increased 7.3% year-over-year to $709.64 million. Its non-GAAP gross profit rose 6.5% from the year-ago value to $582.17 million. The company’s non-GAAP income from operations of $202.09 million indicates growth of 15% from the prior year’s quarter.
In addition, the company’s non-GAAP net income came in at $172.84 million and $0.82 per share, up 15.1% and 13.9% from the prior year’s quarter, respectively.
As per the company’s second-quarter 2024 guidance, DOCU expects total revenue between $725 million and $729 million, and its subscription revenue is expected to range from $705 million to $709 million.
For the full year, the company expects total revenue of $2.92 billion - $2.93 billion and subscription revenue of $2.84 billion to $2.85 billion.
Analysts expect DOCU’s revenue and EPS for the second quarter (ending July 2024) to increase 5.7% and 11.5% year-over-year to $727.11 million and $0.80, respectively. Moreover, the company topped the consensus revenue and EPS estimates in all four trailing quarters.
DOCU’s stock has surged 20.2% over the past nine months and 0.4% over the past year to close the last trading session at $52.20.
DOCU’s POWR Ratings reflect its bright prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
DOCU has an A grade for Quality and Growth. The stock also has a B grade for Value. The stock has topped the list of 19 stocks in the A-rated Software - SAAS industry.
To access DOCU’s other ratings for Momentum, Sentiment, and Stability, click here.
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BMY shares were trading at $41.14 per share on Friday afternoon, up $0.10 (+0.24%). Year-to-date, BMY has declined -17.95%, versus a 15.05% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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