Disclaimer: Please note that we are not financial advisors. This is not financial advice and is for entertainment purposes only. If you need financial advice, please seek a professional financial advisor.
Whether you are an experienced investor or a new one, it makes sense to invest in firms with a low P/E ratio compared to those with a higher one. Also, it is more sensible to invest in a company with more cash on the balance sheet than the one already burdened with debt. In addition, investing in a company with a diversified portfolio probably in multiple sectors guarantees a bigger and steady return on your investment.
So if you are eyeing the best growth stocks to invest in this 2022, the stock performance and the earnings you are likely to get on the investment should guide you when making your selection. Some companies don’t pay dividends in the short run, but their stocks have exponential growth. Such companies, later on, turn out to be top dividend-paying.
At this point, you are set to pick stocks that you can invest in. Unfortunately, there are tens of thousands of stocks to choose from. So how do you select companies whose stock is worth buying?
Of course, it may not be easy for you to select the company to invest in by just looking at the balance sheet. Furthermore, it is not a matter of selecting company’s whose net margins are improving or those you think have a favorable debt position. In this article, we take a close look at two top growth stocks you should consider investing in in 2022.
Apple and Meta Platforms
Apple and Meta Platforms (Facebook) are experiencing gigantic growth. The two companies trade at 24 times earnings, and analysts project that they will continue growing at a higher rate in the next 5 years. In 2021, Apple’s revenue grew by 33% and was expected to perform better in 2022. Its market capitalization stands at $3trillion. Here is a detailed analysis of each company.
Meta Platforms (Facebook)
Meta Platforms has a market capitalization of about $1 trillion, and its year-over-year revenue growth in 2021 was 35.12%. However, it is vital to note that 2021 was a difficult year for Meta platforms. It is the reason why the company stumbled in the second half, where its share price fell by 3%. However, the stumble presented a good opportunity for new investors to buy its shares at a relatively reduced price.
The company’s price-to-earnings ratio was about 24, and analysts expect its earnings per share to increase at a rate of 21% in the next five years. Its management postulates that its fourth-quarter revenue will grow by 21%. So the company’s revenue and, by extension, its earnings are likely to grow steadily in 2022.
Notice that the company is experiencing significant growth in its user base. Its daily users amounted to 2.81 billion in the second last quarter of 2021, 11 % more than it had in 2020. Therefore the firm needs to find ways of monetizing its activities, such as bringing on board more e-commerce features and enhancing its advertising products to remain at the top.
Thus, although Meta Platform has a low valuation, its growth model is promising and is likely to earn investors attractive returns in the long run.
Apple
Apple continues to perform well in terms of revenue generation and expansion. This sterling performance has made its stock to rise by over 33%. It means that any investor planning to buy the company’s stock must be prepared to buy a higher valuation premium. Currently, Apple’s stocks are trading at 32 times its earnings.
In 2021, the company’s revenue grew $366 billion, which is 33% year over year. This happened despite the fact that the company experienced demand constraints that resulted in a loss of revenue in the year. However, the revenue in its product segment grew by more than 20%.
Products such as iPhone, iPad, Mac, home and accessories, services and even wearable each grew by 20% or more. It increased its yearly free cash flow from $73 billion to $93 billion the previous year. Thus, the company returned $24 billion to its shareholders through share repurchase and dividends.
From these data, it is clear that both Meta platforms and Apple have well-established business models with a very strong cash flow. They are robust tech companies with powerful business models whose investments are likely to perform even better in the coming years. It is the reason why they are the best companies to consider investing in in 2022.
