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. Micron Technology (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 132% and 45%, 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% while the stock trades at a miniscule 5.3x forward 12-month earnings.
2. AppFolio, Inc. (APPF)
AppFolio offers cloud-based software solutions for the property management and legal industries. The company’s AppFolio Property Manager is a leading solution for property management, while its MyCase application is ideal for practitioners and small law firms. Currently, the stock is a Zacks Rank #2 (Buy).
AppFolio recently surged into profitability, which is something that investors tend to reward. This fiscal year, current estimates are calling for earnings growth of 66% and net sales growth of 27%. The company is also improving its cash position, generating quadruple-digit cash flow growth and operating with a net margin of nearly 9%.
The firm has also proven to be an efficient one, with Return on Equity of 16% crushing its industry average. AppFolio should be able to use this, and its solid margins, to capitalize on its new business opportunities.
3. Twitter, Inc. (TWTR)
Twitter operates one of the world’s most popular social media websites, but thanks to a number of new initiatives—including a shift to live, original content and a renewed focus on profitability—the stock is now popping up on our growth screens. What’s more, TWTR is currently sporting a Zacks Rank #1 (Strong Buy).
Analysts expect Twitter to witness EPS growth of 69% and sales growth of 19% this year, according to our latest Zacks Consensus Estimates. The company is also witnessing cash flow growth of more than 95% currently.
Meanwhile, Twitter has a number of new partnerships—with many notable media companies and sports organizations—that it should be able to leverage in an internet industry that has increasingly rewarded original content.
Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
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