Growth 840

Growth stocks were once again overshadowed by their value brethren, but still look attractive as the economy continues strengthening.

United Airlines Holdings, Inc. (UAL) | Daily Alert May 24
I wish to put some money into one last American firm that has not yet fully participated in the so-called reopening trade here in the U.S. Although the share price of United Airlines Holdings has doubled since it bottomed out last March, it remains well below pre-pandemic levels.

It is the only major U.S. airline that has failed to recover to new highs. I will add UAL to our portfolio this month, with the understanding that airline stocks do not fit my usual buy-and-hold approach. If these shares rally towards new highs, I will take my capital gain and find a long-term investment to take its place.
David C. Jennett, The Investment Letter, P.O. Box 6170, Holliston, MA 01746, 800-542-5018, March 17, 2021

International Game Technology PLC (IGT) | Daily Alert March 26
Following the sale of its Italian gaming business, International Game Technology will focus on its core business-to-business division and right-size its operations. Because the sale will eliminate high Italian taxes and reduce regulatory burdens, we expect IGT’s margins to improve.

Reflecting earnings beats in five of the past seven quarters (occasionally by triple digits), as well as EPS estimates that have been moving higher over the past 30 days, we are raising our 2021 EPS estimate to $1.00 from $0.95. For 2022, based on our expectations for continued above-consensus results, we are setting an EPS estimate of $1.32. Our long-term earnings growth rate forecast is 7%.

IGT shares are trading near their 52-week high and at an EV/EBITDA multiple of 9.8, above the average multiple of 8.0 prior to the 2015 merger with GTECH S.p.A. However, we believe that the current valuation inadequately reflects the company’s prospects for above-consensus results, as we expect recurring lottery revenue and growth in the gaming business to result in strong revenue and earnings over time. We are maintaining our BUY rating. Our long-term rating remains BUY. Our revised target price of 23, if achieved, offers investors the prospect of a 16% return.
Jim Kelleher, CFA, Argus Weekly Staff Report, argusresearch.com, 212-425-7500, March 18, 2021

CarGurus, Inc. (CARG) | Daily Alert March 30
CarGurus, Inc. was founded in 2005 by Langley Steinert, also a cofounder of TripAdvisor.

CarGurus’ strategy is to provide the world’s most trusted and transparent automotive  marketplace. The site has a wide variety of information for those researching, purchasing, or selling a vehicle, including test drive information, new and used vehicle listings, and financing.

For the most popular use of the site, consumers considering the purchase of used vehicles, the company applies a proprietary algorithm to each vehicle to generate a Deal Rating, one of: Great Deal, Good Deal, Fair Deal, High Priced, or Overpriced. The Deal Rating illustrates how competitive a listing is compared to similar vehicles sold in the same region in recent history. CarGurus’ Deal Rating is backed by the largest number of vehicle listings of any major U.S. online marketplace and dealer reviews by its 36.2 million average monthly U.S. unique visitors.

CarGurus generates revenue in two different segments. Marketplace, 88% of 2020’s total revenue of $552 million, represents subscriptions sold to dealers for vehicle listings. As of December 31, 2020, paying dealers numbered 23,934 in the U.S. and 6,697 in the United Kingdom. The other 12% of sales, Advertising and Other, consists primarily of display advertising revenue from auto manufacturers and other auto-related brand advertisers, and fees from partnerships with financing companies. About 6% of revenue comes from International, mainly the United Kingdom, but CarGurus plans to add other countries in the future.

As for earnings, the pandemic spurred management to seek efficiencies, particularly in its largest expense, sales, and marketing, which saw a 35% decline in 2020. This significant drop supports EPS growth of 84%, to $0.68.

For 2021, the company expects sales to recover as the rollout of COVID-19 vaccinations supports reopening economies. However, earnings are expected to stagnate as the company invests in brand advertising and expands its sales force to sign additional dealers.

As for the dealer wholesale auction market, CarGurus in January purchased a 51% stake in CarOffer, a Texas-based private company with an online wholesale auction website that allows dealers to inspect, bid, transact, and transport used vehicles.

Analysts are projecting CarGurus can grow earnings 21% per year. Five years of this growth and our selected high P/E of 35 could generate a stock price as high as 61. We use a low price of 14, the product of calendar year 2020 EPS of $0.68 and the average low P/E of 21. The upside/downside ratio is 3.5 to 1.

CarGurus is well capitalized with cash and investments of $290 million on December 31, 2020 and no debt other than operating leases.
Doug Gerlach, InvestorAdvisoryService.com, 1-877-33-ICLUB, April 2021

MarineMax, Inc. (HZO) | Daily Alert March 31
Last week, the Internal Revenue Service (IRS) deposited around 90 million stimulus payments.

There is, of course, a wide range of things that people will be spending that extra cash on. But two big sectors that will see an influx are:

1) Consumer staples

2) Consumer discretionary

Consumer staples, of course, are companies that either produce or sell products that people buy on a regular basis. Consumer discretionary are those that are generally considered nonessential but are desirable if there is sufficient income. This includes fast-food restaurants, entertainment products and services, clothing and even automobiles.

These two sectors tend to do well over different parts of the economic cycle. But right now, we have a very divided economy. There are consumers that will use that stimulus for staple goods that they have been struggling to get. And we have consumers that have been more fortunate over the course of the pandemic and will consider this money as being “extra.”

Of course, I’m not saying that every company in each of these sectors will thrive. To investigate which ones you should consider, let’s use the Weiss Ratings stock screener.

When entering consumer discretionary into the sector search field, I found there were 30 “B”-rated stocks and 46 “B-”-rated stocks. That’s 76 companies with a “Buy” rating. MarineMax is one of the top three.

MarineMax, Inc. is headquartered in Clearwater, Florida, and is the nation’s largest recreational boat and yacht retailer.

MarineMax recently reported first-quarter results of fiscal year 2021. The company saw record December quarter revenue growth of 35%, and diluted EPS more than doubled.

Sounds like people are starting to part with their dollars and put them into outdoor recreation. Shares are up 486% over the past year and up 109% over the past six months.

This is just one potential way to cash in on the stimulus trend.
Mike Larson, Weiss Stock Ratings Heat Maps, issues@e.weissratings.com; phone: 1-877-934-7778, March 25, 2021

*Perdoceo Education Corporation (PRDO)
P/E Growth: Peter Lynch

Perdoceo Education Corporation, formerly Career Education Corporation, offers education to students in a range of career-oriented disciplines through online, on-ground and hybrid learning programs. Its American InterContinental University (AIU) and Colorado Technical University (CTU) provide degree programs through the master’s or doctoral level as well as associate and bachelor’s levels. The company operates through four segments: CTU, AIU, Culinary Arts and Transitional Group. Its University group consists of AIU and CTU, which serve students online with career-focused degree programs. Its Career Colleges Group consists of Culinary Arts and Transitional Group segments. The Culinary Arts segment includes Le Cordon Bleu institutions in North America (LCB), which offer hands-on educational programs in the career-oriented disciplines of culinary arts and patisserie and baking in the commercial-grade kitchens of Le Cordon Bleu.

This methodology would consider PRDO a “fast-grower.”

P/E/GROWTH RATIO: PASS
EPS GROWTH RATE: PASS
TOTAL DEBT/EQUITY RATIO: PASS
NET CASH POSITION: BONUS PASS
John Reese, Validea Hot List Newsletter, validea.com, 877-439-0506, April 2021

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