Blue-chip stocks are always profitable or on the verge of entering the black, and the Street is currently in love with profitable companies. In my own portfolio, nearly all of the stocks of profitable companies have climbed significantly in 2023, and the reverse is true for the unprofitable firms whose shares I own.
I believe the reason for the dichotomy is that the Street is convinced that, because of high interest rates, the shares of unprofitable firms are too dangerous to touch. This philosophy, in my view, is highly flawed because there are many ways that unprofitable companies with great futures can obtain funds without paying elevated rates, such as by selling additional shares of their stock or selling convertible bonds at relatively low rates.
Nonetheless, due to the Street’s infatuation with profitable companies, this is a good time for all investors to buy blue-chip stocks. Since the top and bottom lines of these three names are all growing rapidly, they are a good fit for growth investors as well as their more conservative counterparts.
Workday (WDAY)
Workday (NASDAQ:WDAY) develops “enterprise cloud applications,” including “financial management applications” and “human capital management solutions.”
It’s clearly a leader in the field as analysts expect its top line to come in at an impressive $7.2 billion this year. The work-at-home trend is making human resources more difficult for employers who never had to cope with the issue before Covid. Consequently, many small and medium companies will probably start utilizing software to help them handle human resources, enabling Workday’s growth to meaningfully accelerate going forward.
Workday’s sales climbed 16% last quarter versus the same period a year earlier, while its subscription revenue advanced 19% year-over-year to $1.6 billion. Even more impressively, the firm’s subscription revenue backlog soared 32.5% YOY to $17.85 billion.
On the bottom line, its earnings per share rose 20% to 30 cents. Analysts expect the company’s EPS to climb to $6.61 next year from $3.64 in 2022.
Restaurant Brands (QSR)
In-line with my previous predictions, Restaurant Brands (NYSE: QSR), under the leadership of former Dominos Pizza CEO Chairman Patrick Doyle, continues to flourish.
Last quarter, the owner of Burger King and Popeyes reported that its revenue jumped 6.4% in Q3 versus the same period a year earlier, while its systemwide sales soared 11% year-over-year. Moreover, the company’s EBITDA, excluding certain items, jumped 9.3% YOY.
Burger King’s international business is really on fire, as its system-wide sales soared 13% in Q3 versus the same period a year earlier to more than $14.5 billion.
Analysts, on average. expect the company’s EPS to climb 7% next year to $3.46.
TJX (TJX)
TJX (NYSE:TJX) is another blue-chip company that, in-line with my previous predictions, has had an excellent year. Indeed, the company’s stock is up 14% this year and 29% in the last 12 months.
And, with prices having risen a great deal in the last few years and many working and middle-class consumers looking for bargains, the discount retail chain’s financial results should continue to impress investors going forward.
Indeed, analysts, on average, expect the company’s earnings per share to climb to $4.08 next year from $3.72 this year.
The shares’ forward price-to-earnings ratio of 22.7 is attractive, given the company’s favorable set-up and strong, expected growth.
On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
