Multi-decade high inflation and the expected aggressive interest rate hikes to combat it has created a fear of an economic slowdown. Apart from this, worries about several other headwinds, such as prolonged supply chain bottlenecks, no measurable progress on ending the Ukraine-Russia war, and rising oil prices have made the stock market extremely volatile.
However, experts anticipate that the economy will continue to recover this year, though at a slower pace. This should bode well for fundamentally sound growth stocks.
That’s why today we're highlighting 3 exciting stocks from our Top 10 Growth screen, which is just 1 of the 10 screens in our POWR Screens 10 service (more on that below). DLH Holdings Corp. (DLHC), Resources Connection, Inc. (RGP), and Veritiv Corporation (VRTV) possess solid growth attributes and could deliver significant returns in the near term. These are rated a Strong Buy in our proprietary POWR Ratings system.
DLH Holdings Corp. (DLHC)
DLHC renders technology-enabled business process outsourcing, program management solutions, and public health research and analytics services in the United States. The company provides defense and veterans' health solutions, including healthcare, technology, and logistics solutions to the VA, Defense Health Agency, Tele-medicine, and Advanced Technology Research Center, Navy Bureau of Medicine and Surgery, and the Army Medical Research and Materiel Command.
For the first quarter ending December 31, 2021, DLHC's revenue increased 164.1% year-over-year to $152.80 million. The income from operations grew 208.6% from its year-ago value to $11.22 million, while its net income improved 330.2% from its prior-year quarter to $7.80 million. The company's EPS rose 323.1% from its year-ago value to $0.55.
The consensus EPS estimate of $0.33 during the second quarter ending March 2022 represents an improvement of 73.7% year-over-year. Analysts expect DLHC's revenue to increase 54.8% year-over-year to $95.20 million during the second quarter ending March 2022. In addition, the company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters.
The stock has gained 72.5% over the past year and 30.4% over the past six months. DLHC's revenue and EBITDA have grown at CAGRs of 35.6% and 39.5%, respectively, over the past three years.
DLHC's POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
DLHC is also rated an A grade for Value and Growth and a B for Quality. Within the A-rated Industrial – Services industry, it is ranked #2 of 89 stocks.
To see additional POWR Ratings for Stability, Momentum, and Sentiment for DLHC, click here.
Resources Connection, Inc. (RGP)
RGP offers consulting services to business customers under the Resources Global Professionals name in North America, Europe, and the Asia Pacific. The company provides services in transactions, including integration and divestitures, bankruptcy/restructuring, going public readiness and support, financial process optimization, system implementation, and regulations.
RGP recently announced plans to widen the digital staffing platform HUGO into the Texas and California markets in FY23. The expansion is followed by a successful pilot phase in the New York Tristate Region that has generated positive feedback from clients, talent, and RGP team members. "We are creating a new channel for companies who have needs for finance and accounting project-based professionals caused by a rapidly changing workforce environment," said Kate Duchene, CEO of RGP.
RGP's revenue increased 30.6% year-over-year to $204.61 million during the third quarter ending February 26, 2022. The income for operations grew 756.2% from its year-ago value to $17.50 million, while its net income improved 2714.6% from its prior-year quarter to $19.42 million. The company's EPS improved 2800% year-over-year to $0.58.
The $1.70 EPS estimate during the fiscal year 2022 represents a 118.1% year-over-year growth. Analysts expect RGP's revenue to increase 23.7% year-over-year to $231.12 million for the fourth quarter ending May 2022. The company's shares have surged 24.1% over the past year and 30.1% over the past nine months.
RGP's revenue has grown at a CAGR of 5.3% over the past five years. Furthermore, the company's EBITDA grew at a CAGR of 14.5% over the past three years.
RGP's strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock has a B grade for Value, Sentiment, and Quality. In the A-rated Outsourcing - Staffing Services industry, it is ranked #2 of 18 stocks.
In total, we rate RGP on eight different levels. Beyond what we've stated above, we have also given RGP grades for Growth, Stability, and Momentum. Get all the RGP ratings here.
Veritiv Corporation (VRTV)
VRTV functions as a business-to-business provider of value-added packaging products and services and facility solutions, print, and publishing products and services internationally. The Packaging segment provides custom and standard packaging solutions; the Facility Solutions segment sources and sells cleaning, break-room, and other supplies; and the Publishing segment sells and distributes coated and uncoated commercial printing papers to publishers, retailers, converters, printers, and specialty businesses.
In the fourth quarter ending December 31, 2021, VRTV's net sales increased 13.5% year-over-year to $1.86 billion. The operating income grew 208% from its year-ago value to $80.4 million, while its net income improved 77.8% from its prior-year quarter to $56.9 million. The company's EPS rose 93.2% from its previous period to $3.67.
Analysts expect VRTV's revenue to increase 13.6% year-over-year to $1.77 billion for the first quarter ending March 2022. The consensus EPS estimate of $3.73 for the first quarter ending March 2022 represents a 191.4% improvement year-over-year. In addition, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters.
The stock has soared 213.5% over the past year and 130.2% over the past nine months. VRTV's levered free cash flow and EBITDA have increased at CAGRs of 172.3% and 35.4%, respectively, over the past three years.
It is no surprise that VRTV has an overall A rating, which equates to Strong Buy in our POWR Ratings system. VRTV has an A grade for Sentiment and Growth and a B for Value. Within the B-rated Industrial – Packaging industry, it is ranked #1 of 22 stocks.
Click here to see the additional POWR Ratings for VRTV (Momentum, Stability, and Quality).
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DLHC shares were trading at $17.47 per share on Monday afternoon, down $0.81 (-4.43%). Year-to-date, DLHC has declined -15.69%, versus a -7.82% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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