For years, many of Wall Street’s best growth stocks have emerged from the technology sector. Despite some recent market volatility and a downturn in the semiconductor industry, strong earnings and impressive sales remain the story for many tech companies.
With that said, let’s pair the proven Zacks Rank with our Style Scores system. This system includes a “Growth” category that helps us find tech stocks poised for solid growth. 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 solid return on equity.
Now it’s time to check out three tech stocks that came through our screen today that growth investors might want to consider as we move beyond second-quarter earnings season.
1. EPAM Systems, Inc. EPAM
EPAM Systems shares have soared 65% in 2019 to crush the S&P 500’s 14% climb and its industry’s 18% jump. The IT services firm operates in over 25 countries, across four continents and works with a diverse array of clients on everything from software engineering & product/platform development to infrastructure & licensing. The Newtown, Pennsylvania-based company posted stronger-than-projected second-quarter results on August 8, which helped management up its full-year guidance.
Looking ahead, our Zacks Consensus Estimates call for the company’s Q3 revenue to surge 23.9% to $580.03 million to match Q2’s top-line expansion. EPAM’s full-year sales are then projected to climb over 23% to $2.27 billion, with 22.2% higher growth expected in the following year that would see it reach $2.77 billion. The digital platform engineering and software development services firm is also expected to post roughly 21% bottom-line growth this year and next year. EPAM’s recent positive earnings estimate revision activity helps it earn a Zacks Rank #2 (Buy) right now. The company also sports a “B” grade for Growth in our Style Scores system and has been on a stellar run since going public in 2012.
2. Digital Turbine, Inc. APPS
Digital Turbine operates a business that aims to connect OEMs, mobile operators, and publishers with advertisers and app developers. The company works with everyone from big-name tech giants such as Facebook FB and Uber UBER to retailers and restaurants including Target TGT and Domino's DPZ. APPS stock has soared 360% over the last 52 weeks and 70% in the last three months. We should note that Digital Turbine shares still trade far below the $10 per share threshold, at roughly $6.50. This makes the stock somewhat more speculative and volatile.
Nonetheless, Digital Turbine posted better-than-projected Q1 fiscal 2020 earnings and revenue results on August 5. The company’s earnings estimate revision activity has also trended heavily in the right direction since then, especially for fiscal 2020 and 2021. This movement helps APPS hold a Zacks Rank #1 (Strong Buy) at the moment. The Austin, Texas-based company is projected to see its full-year fiscal 2020 revenue jump 26.4% to $130.89 million. At the bottom end of the income statement, Digital Turbine’s adjusted fiscal 2020 EPS figure is expected to skyrocket 150% to reach $0.20 a share. APPS also earns an “A” grade for Growth in our Style Scores system.
3. Microsoft MSFT
Microsoft is a historic technology company and its growth days appear far from over. In fact, its expansion into cloud computing, driven by Amazon AMZN competitor Azure, has helped MSFT become the world’s most valuable public company with a market cap over $1 trillion. Microsoft shares have outpaced all of the FAANG stocks over the last two years. And unlike all of its high-profile tech peers in this group, with the exception of Apple AAPL, MSFT pays a dividend and its 1.35% yield sits not too far below the 10-year U.S. Treasury note.
The Redmond, Washington-based firm is a Zacks Rank #2 (Buy) at the moment that rocks an “A” grade for Growth. The company’s current year—fiscal 2020—revenue is projected to surge 11% to reach $139.76 billion, with 2021’s sales figure expected to climb 10.5% higher. At the bottom end of the income statement, MSFT’s adjusted earnings are projected to jump 9.9% in 2020 and 12.7% higher in 2021. Along with its cloud computing growth, MSFT’s has bolstered its legacy businesses and is prepared to expand its gaming division to take on challengers like Google GOOGL.