Even though investors rotated away from expensive growth stocks earlier this year, select growth stocks have been experiencing strong rebounds and in some instances are making new highs. Investors’ interest in the large-cap growth stocks is evident from the SPDR Portfolio S&P 500 Growth ETF’s (SPYG) 7.5% returns over the past month and 11.8% returns over the past three months.
While two interest rate hikes are expected in late 2023, rates have been held near zero for now. This should benefit growth companies with their access to cheap capital. On the other hand, the economic recovery is creating new growth opportunities for these companies. According to The Conference Board, the United States’ real GDP is expected to grow 6.6% year-over-year this year.
Amid this favorable backdrop, it is wise to bet on large-cap quality stocks such as Intuitive Surgical, Inc. (ISRG), Illumina, Inc. (ILMN), and Edwards Lifesciences Corporation (EW) that possess solid growth attributes.
Intuitive Surgical, Inc. (ISRG)
One of the pioneers of robotic-assisted surgery ISRG is known for its da Vinci surgical system which is used by surgeons to deliver a less invasive approach to many types of surgeries. Its da Vinci Surgical System includes surgeon's consoles, patient-side carts, 3-D HD vision systems, and skills simulators. It has a market capitalization of $113.05 billion.
The company’s total revenue of $1.29 billion for the first quarter ended March 31, 2021, represents a 17.5% year-over-year rise. ISRG’s gross profit has increased 22.3% year-over-year to $902.60 million. Its net income has increased by 37.6% year-over-year to $435.20 million. Its adjusted EPS came in at $3.52, up 30.9% year-over-year. Its revenue and EPS have increased at CAGRs of 11.2% and 13.5%, respectively, over the past three years.
Analysts expect ISRG’s EPS and revenue to increase 175.7% and 48.3% year-over-year to $3.06 and $1.26 billion, respectively, for the quarter ended June 30, 2021. It surpassed the consensus EPS estimates in each of the trailing four quarters.
Intuitive India, the India arm of ISRG, launched India’s first robotic-assisted surgical stapler called SureForm on June 29, 2021, that comes equipped with SmartFire technology. The company is expected to witness increasing demand for this product owing to its unique features. The stock has gained 65.9% over the past year to close yesterday’s trading session at $954.69.
ISRG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its weighting.
The stock has a B grade for Growth, Sentiment, and Quality. Click here to access ISRG’s ratings for Momentum, Stability, and Value as well.
ISRG is ranked #60 of 184 stocks in the Medical-Devices & Equipment industry.
Illumina, Inc. (ILMN)
With a market capitalization of $69.12 billion, ILMN provides sequencing and array-based solutions for genetic and genomic analysis. The company provides instruments and consumables used in genetic analysis, and genotyping and sequencing services, among others.
For the fiscal first quarter ended April 4, 2021, ILMN’s total revenue increased 27.2% year-over-year to $1.09 billion. The company’s non-GAAP net income came in at $278 million, up 14.4% year-over-year. Its non-GAAP EPS increased 15.2% from the same period last year to $1.89. Its revenue has grown at a CAGR of 9% over the past five years while its EPS has grown at a CAGR of 3.5% over the past three years.
The company’s EPS is expected to come in at $1.35 for the quarter ended June 30, 2021, which represents a 117.7% year-over-year increase. ILMN surpassed the consensus EPS estimates in three of the trailing four quarters. Its revenue is expected to increase 40.2% year-over-year to $1 billion for the quarter ending September 30, 2021.
ILMN and Kartos Therapeutics, Inc. announced a new partnership on April 22 to co-develop a TP53 companion diagnostic based on the content of ILMN’s comprehensive genomic profiling assay — TruSight Oncology 500. This is expected to expand the company’s TruSight Oncology offerings into hematologic malignancies. The stock has gained 46% over the past nine months to close yesterday’s trading session at $473.45.
It’s no surprise that ILMN has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Quality, and a B grade for Growth and Sentiment. Click here to see the additional POWR Ratings for ILMN (Value, Momentum, and Stability). Out of 496 stocks in the Biotech industry, ILMN is ranked #7.
Edwards Lifesciences Corporation (EW)
EW provides products and technologies for structural heart disease, and critical care, and surgical monitoring. It has a market capitalization of $67.06 billion. The company’s products are categorized into three areas: Transcatheter Heart Valves, Surgical Structural Heart, and Critical Care.
EW’s net sales increased 7.8% year-over-year to $1.22 billion for the first quarter ended March 31, 2021. The company’s non-GAAP net income came in at $340.40 million, up 6.2% year-over-year. Its non-GAAP EPS for the quarter came in at $0.54 compared to $0.50 in the prior-year quarter. The company’s revenue has grown at a CAGR of 11.5% over the past five years while its EPS has grown at a CAGR of 15.9% over the past three years.
Analysts expect EW’s EPS and revenue to increase 61.8% and 38.1% year-over-year to $0.55 and $1.28 billion, respectively, for the quarter ended June 30, 2021. It surpassed Street EPS estimates in three of the trailing four quarters.
On June 1, 2021, EW announced that the Acumen Hypotension Prediction Index (HPI) software with the Acumen IQ finger cuff has received the United States Food and Drug Administration clearance. Its corporate vice president, critical care, Katie Szyman said, “This latest predictive technology demonstrates our commitment to patient care and providing clinicians with 'smart' monitoring tools that allow for better prediction and management.” The stock has gained 57.3% over the past year to close yesterday’s trading session at $107.88.
EW’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary ratings system. The stock has a B grade for Growth, Stability, Quality, and Sentiment as well. Click here to see the additional POWR Ratings for EW (Value and Momentum). EW is ranked #33 in the Medical-Devices & Equipment industry.
ISRG shares were trading at $951.25 per share on Thursday afternoon, down $3.44 (-0.36%). Year-to-date, ISRG has gained 16.28%, versus a 16.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand.
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