Growth stocks will always remain a popular choice among equity investors due to their ability to derive outsized gains over the long-term. Growth companies manage to increase revenue and earnings at a far higher pace compared to peers or the industry as a whole.
These stocks are a great way to build wealth and may even accelerate your retirement plans. One way to pick growth stocks is to identify companies that have an innovative product or service with a significant market share.
Here we look at two such stocks that you can look to add to your portfolio right now
A renewable energy giant
The first company on the list is Brookfield Renewable Partners (BEP) , whose shares have surged close to 50% year-to-date and almost tripled in the last five years. Brookfield Renewable Partners owns and operates a portfolio of renewable power generating facilities that includes close to 200 hydroelectric generating stations,11 wind facilities, and two natural gas plants.
In the September quarter, Brookfield’s funds from operations (or FFO) rose 28% year-over-year on a per-share basis. This increase was driven by the company’s acquisition of TerraForm Power.
In the last two decades, Brookfield Renewable has generated annual returns of 18%, compared to the 6% returns of the S&P 500 in this period. The shift towards renewable and clean energy is expected to gain pace in the upcoming decade which will lower capital expenditure substantially and drive revenue and earnings growth for Brookfield and peers.
The company expects to grow FFO per share between 10% and 16% annually through 2025. It said FFO will surge higher due to its focus on acquisitions and expansion projects that are currently in the pipeline.
Brookfield also has a forward yield of 3% and the company aims to increase dividend payouts between 5% and 9% annually. Brookfield has a strong balance sheet and is trading at a higher valuation compared to peers. But this valuation is supported by strong growth metrics and robust fundamentals.
NVIDIA stock has returned 1,600% in the last five years
NVIDIA (NVDA) is another growth stock that investors need to watch out for. This semiconductor giant has returned a staggering 1,600% since December 2015 and 3,500% in the last 10 years.
NVIDIA is a company that deals in programmable graphics processor technologies. Its major business segments are GPUs (graphics processing units), handheld & consumer electronics, and media & communications processors.
In the fiscal third quarter of 2021, NVIDIA’s sales were up 57% at $4.73 billion while adjusted net income soared 66% to $1.83 billion. Its GPU business was supported by strong growth in the gaming as well as data center verticals.
The gaming business accounts for 48% of total sales in Q3 and the company benefited from an increase in demand for notebook and desktop GPUs. NVIDIA recently launched the RTX 30 series cards that will be a key revenue driver for the company in the upcoming quarters.
Its data center business experienced a sales growth of 162% in Q3 and revenue stood at $1.9 billion, accounting for 40% of total sales. After accounting for the Mellanox acquisition, NVIDIA’s data center sales rose 77% to $1.28 billion.
In Q4, the company forecasts sales growth of 54% year-over-year at $4.8 billion. Further, analysts expect sales to grow by 51% to $16.5 billion in fiscal 2021 and by 20.4% to $19.9 billion in 2022. Analysts also expect earnings to grow at an annual rate of 22% in the next five years.
NVIDIA stock is valued at a price to 2022 sales multiple of 16.8x while its price to earnings multiple is also steep at 46.5x. However, its high valuation is supported by solid revenue and earnings growth.
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BEP shares were trading at $58.55 per share on Tuesday afternoon, up $0.26 (+0.45%). Year-to-date, BEP has gained 64.69%, versus a 16.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditya Raghunath
Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist.
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