After the market appeared to be strong earlier this year, many growth stocks began to steam again. At the time of writing, the S&P 500 is 4% higher so far.
While this market optimism is excellent for investor portfolios, it becomes difficult to buy good stocks to buy. By paying higher prices for stocks, investors are likely to get lower returns in the long run than they could buy at a discounted price. However, a close examination still shows that high quality companies whose shares still look attractive even after their recent higher increases have been done.
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1. Appeal
One surprising stock that is still worth buying after decades of large stock price valuation is appeal (NASDAQ: AAPL). The company’s most recent earnings report showed how this company, despite its $ 2.3 billion market capitalization, remains in growth mode today. During the holiday season, which is Apple’s first quarter of fiscal 2021, revenue rose 21% year-on-year to $ 111 billion. Earnings per share rose 35% to $ 1.68.
But even these significant financial figures do not fully capture Apple’s momentum. Consider the momentum in its newer segments, services and portable items.
Apple’s services segment, with a gross profit margin that is about twice what the technology giant earns on its hardware sales, is growing even faster than the company’s consolidated top line. Services revenue during the holiday quarter increased by 24% year-on-year. The strength of this segment is paramount, as it includes sales of the App Store, Apple’s subscription services, AppleCare, and other software and services that are good resources for Apple.
Then there’s Apple’s wearables, home and accessories – a hardware segment that includes sales of AirPods, Apple Watch, HomePod and other accessories. In this segment, turnover increased by 30% compared to the previous year.
If you think Apple’s growth days are behind it, think again.
One smaller business that is growing much faster than Apple Pinterest (NYSE: PINS). The visual search and media platform looks more and more like an advertiser’s dream platform. Many involved users spend their time on the platform searching for products and reading photos. What does an advertiser want more from their target audience?
It is no surprise that advertisers are flocking to the platform, especially as user engagement continues to improve. Supported by a 37% year-over-year increase in Pinterest’s monthly active users in the fourth quarter, advertising-driven revenue rose 76%.
Investors must, of course, pay a premium to enter into such a growth story. Pinterest has a market capitalization of $ 51 billion, despite delivering just $ 1.7 billion in 12-month sales. Keep in mind that this figure is changing rapidly. On average, analysts expect revenue of $ 2.5 billion in 2021 and revenue of $ 3.4 billion in 2022.
These two established technology companies are probably worth their premium prices. Volatility must, of course, be expected. But in five to ten years from now, we will probably look back and even regard these increased levels as good access points to these growth stocks.