By their very nature, growth investors are primarily focused on finding companies whose earnings and revenue are expected grow at a rate that outpaces the market. This investment strategy comes with its fair share of risks, but it also brings the exciting possibility of outsized returns—an end goal that every investor desires.
Over the past several years, Wall Street’s most exciting growth stocks have emerged from the technology sector. From industry innovators like Amazon AMZN and Netflix NFLX to exciting foreign stocks such as Alibaba BABA, tech-focused growth investors have been rewarded with massive profits recently.
Strong earnings and impressive sales imply that the technology sector’s hot streak could continue throughout 2018—despite recent market-wide volatility. That means that growth investors searching for the next great market-beating stock might want to keep their focus on tech companies.
Luckily, we can pair the proven Zacks Rank with our innovative Style Scores system, which includes a “Growth” category, to find strong growth tech stocks. Investors should note that our Growth category values earnings and sales growth, as well as improvements to a company’s financial statements—including strong cash flows and great return on equity.
With all of this said, check out these three tech stocks for growth investors to consider now:
1. DXC Technology Company (DXC)
DXC Technology is a leading end-to-end IT services and solutions company. It services include analytics, applications, business processes, cloud computing, consulting, enterprise and cloud applications, security, and more.
DXC immediately sticks out because of its strong estimate revision activity. Within the past 90 days, the Zacks Consensus Estimate for its full-year earnings per share has gained 34 cents. DXC is now expected to see its full-year earnings growth hit 153.6% this year and 15.0% next year. This positive revision activity has earned the stock a Zacks Rank #2 (Buy), and impressive growth estimates help pad its “A” grade for Growth.
Investors should also note that DXC is witnessing cash flow growth that outpaces its own historical average, and its net margin of 5.2% and RoE of 18.0% both crush their respective industry averages. Looking further ahead, the firm is projected to improve its bottom line at an annualized rate of 10.5% over the next three to five years.
2. Micron Technology, Inc. (MU)
Micron is one of the leading worldwide providers of semiconductor memory solutions. The company’s memory solutions are marketed towards customers in a variety of industries, including computer manufacturing, consumer electronics, and telecommunications. Thanks to rising demand for digital memory—due to new applications like Internet of Things and artificial intelligence—Micron has emerged as a popular growth stock over the past year or so.
MU’s popularity comes with good reason, especially considering that its earnings and revenue are expected to surge by 121.6% and 43.5%, respectively, this fiscal year. It is also noteworthy that the company has witnessed nine positive revisions to this EPS estimate within the past 60 days, against zero to the downside.
Positive revisions have lifted MU to a Zacks Rank #1 (Strong Buy), but investors will also note that the company is growing its cash flow at a shocking rate of 186.1% while the stock trades at a miniscule 4.4x forward 12-month earnings.
3. Lam Research Corporation (LRCX)
Lam Research is a designer and manufacturer of semiconductor processing equipment used in the fabrication of integrated circuits. The company is recognized as a leading supplier of front-end wafer processing equipment to the worldwide semiconductor industry. Despite this existing leadership position, LRCX is slated to witness massive earnings and revenue growth soon.
Based on current consensus estimates, we expect Lam Research to post EPS growth of 75.8% and net sales growth of 38.0% this fiscal year. Meanwhile, the firm is generating cash flow growth of 45.8% and RoE of 41.1%. LRCX is also sporting a Zacks Rank #1 (Strong Buy) right now.
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The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
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