Investing in companies and growth stocks with robust earnings potential is akin to striking gold. Earnings are the lifeblood of a company, representing the profit left after all expenses have been settled. Consistent earnings growth is a testament to a company’s ability to generate profits efficiently and sustainably over time.
When a company experiences explosive earnings growth, it signals the potential for a sustained period of prosperity. Investors are well aware that such growth phases can yield significant rewards, essentially transforming earnings into a cash machine for shareholders.
As companies reinvest their earnings back into the business, a virtuous cycle of growth can ensue if managed effectively. Earnings growth not only boosts investor confidence but also signifies that the company’s fundamentals, products/services, and strategic decisions are all aligned for success.
Potential in Growth Stocks: Advanced Micro Devices (AMD)
At present, Advanced Micro Devices (NASDAQ:AMD) may appear to be in a brief slump, but this dip could actually present a prime buying opportunity. The world of AI stocks is in flux due to a mix of positive news and potential disruptions. With AMD shares hovering around $155, now might be the perfect time to seize the moment.
In terms of earnings growth, AMD is truly shining. The company delivered earnings per share of $0.53 in 2023. Projections indicate that this figure is set to skyrocket by 570% to reach $3.54 this year. Notably, AMD managed to turn a loss of $139 million in the first quarter of 2023 into a net income of $123 million in Q1 of this year, marking a remarkable 188% year-over-year surge.
This impressive turnaround is fueled by record data center sales totaling $2.3 billion in the period. With robust earnings reported by Taiwan Semiconductor Manufacturing (NYSE:TSM), the outlook for the AI sector, including AMD, appears promising. Expect AMD to continue churning out cash as a result of these favorable developments.
Salesforce (CRM)
Salesforce (NYSE:CRM) stands out as another cash machine stock poised for explosive earnings growth. The company’s first-quarter performance hints at a stellar year ahead, particularly in the realm of customer relationship management, bolstered by the integration of AI technologies.
During the initial quarter, Salesforce witnessed a 44% surge in net income, with per-share net income climbing to $2.44. These figures align well with the anticipated $10 EPS for 2024, representing a notable 138% uptick from 2023 results. Revenue also saw an 11% boost in Q1.
A key factor driving excitement around Salesforce is its position as the leading provider of AI-driven CRM solutions, empowering enterprises to enhance customer engagement. Currently priced below its consensus target at $247, Salesforce shares are ripe for consideration to capitalize on its growth potential.
ServiceNow (NOW)
ServiceNow (NYSE:NOW), a prominent player in automation software, showcases explosive growth potential fueled in part by its earnings trajectory. A glance at the projected EPS growth for this year and beyond elucidates why investors are eagerly eyeing this stock.
In the first quarter, ServiceNow outperformed Wall Street’s expectations with earnings and sales figures surpassing projections. The company reported an impressive $2.6 billion in total revenues during the period, setting the stage for continued growth.
Of particular note is the $8.45 billion in performance obligations looming in the next 12 months, signaling a substantial influx of revenue in the pipeline. ServiceNow’s foray into AI, especially with its product Now Assist, has significantly augmented its annual contract value, positioning the company as a compelling prospect in the AI landscape.
ServiceNow’s earnings prowess, coupled with its AI initiatives, underscores its appeal for investors seeking growth opportunities. Don’t miss out on the potential these growth stocks offer.
On the date of publication, no positions were held in the securities mentioned in this article.
Meet the writer: Alex Sirois is a stock enthusiast whose investment strategy revolves around building wealth through long-term, high-value stock picks.
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This article on cash-generating growth stocks originally appeared on InvestorPlace.