2 unstoppable growth stocks to buy now


gGrowth stocks have performed exceptionally well over the past decade, thanks in part to a favorable interest rate environment in the United States. But with authorities raising interest rates — not to mention inflation, geopolitical tensions and other market-wide issues — growth stocks have been hammered lately. Fortunately, these challenges are likely temporary.

For long-term investors, the market downturn is a great opportunity to seek out stocks of strong companies for sale. Here are two great options: Veeva Systems (NYSE: VEEV) and Visa (NYSE:V). Here is the recap.

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1. Veeva Systems

Veeva Systems’ performance over the 12-month period is significantly below that of the market. The company owes this in part to its rich metrics. Veeva’s forward price-to-earnings (P/E) ratio is 52.4, even after the hits it took last year. For context, the average P/E ratio for the healthcare industry is 15.6. Stocks that look expensive tend to be more volatile when market-wide concerns arise.

That said, Veeva Systems’ business is still doing well. The company’s cloud-based solutions for regulatory compliance that target the life sciences industry remain in relatively high demand. Even amid economic problems, the development of essential products such as innovative medicines and diagnostic tests continues.

In its latest update – for the first quarter of its 2023 fiscal year, which ended April 30 – Veeva showed encouraging progress.

Revenue for the quarter jumped 16% year over year to $505.1 million. The company’s adjusted net income rose 9% to $159.8 million. Veeva is on track to hit its goal of $3 billion in revenue by 2025. But investors should look beyond that point. There are plenty of other opportunities in the massive $2.2 trillion (and growing) life sciences industry.

Additionally, the Veeva Systems business benefits from high switching costs. For its customers, jumping ship would mean severe business disruption as they rely on these cloud-based solutions to help them comply with strict regulatory guidelines and bring their products to market. Veeva Systems has expanded into other highly regulated areas, including the cosmetics industry. While the company may continue to face short-term headwinds, the long-term vision remains intact, and those who remain loyal to Veeva Systems will be handsomely rewarded down the line.

2.Visa

Visa is one of the world’s leading payment networks. The apparent ubiquity is one of the strengths of this company. Visa is undoubtedly a highly recognizable brand, largely due to the fact that it has few direct competitors; his only notable peer is MasterCard. Visa collects a fee each time a customer uses a card bearing their name to make a purchase, whether in a brick-and-mortar store or online.

That means the company’s revenue is tied to payment volume, a metric that has fallen over the past two years due to pandemic-related dynamics. However, payment volume now appears to be bouncing back and Visa is taking advantage. In the third quarter of its fiscal 2022, which ended June 30, Visa’s revenue jumped 19% year-over-year to $7.3 billion. This is explained by a 12% increase in the volume of payments.

Visa’s adjusted net income was $4.2 billion, up 29% from a year ago.

Visa is not out of the woods yet. We still face some economic uncertainty. A recession could be on its way. If we officially enter recession territory, it seems plausible that payment volumes will plummet, further hurting Visa’s business. But none of these reasons are enough to stay away from the company.

Rising consumer spending and the ongoing shift to digital payments will both be powerful tailwinds that should help propel Visa’s revenue and earnings forward. According to some estimates, digital payments will grow at a compound annual growth rate of 15.1% through 2028.

Meanwhile, Visa’s payment network benefits from the flywheel effect, meaning the value of the company’s service increases as more and more people use it. The more customers connect to Visa’s networks, the more merchants it attracts, and vice versa. That’s why the company will almost certainly maintain its duopoly with Mastercard for a long time to come – and deliver great returns to investors in the process.

10 stocks we like better than Veeva Systems
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* Portfolio Advisor Returns as of July 27, 2022

Prosper Junior Bakiny has no position in the stocks mentioned. The Motley Fool fills positions and recommends Mastercard, Veeva Systems and Visa. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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