3 Zacks Rank #1s with Growth AND Value

With the economy set to take off once we put this pandemic in the past, investors don’t have to search for growth OR value. There’ll be plenty of opportunities to get the best of both worlds at the same time. You just need to know where to look!

We’ve got a screen that not only helps you find big growth rates and low valuations, but also adds the power of the Zacks Rank. This screen is ingeniously titled: Growth & Value Plus Zacks Rank #1

Below are three stocks that recently passed the test.

Alcoa (AA)

We all know Alcoa (AA) as a global leader in alumina and aluminum products, but it also had the distinction of being the unofficial start to earnings season. But these days, investors pay more attention to the fancy-schmancy financial space when it comes to kicking things off. But it really doesn’t matter whether you begin with bauxite or banks, we had a fantastic start to the season this year… and Alcoa was part of it.

The company said its first quarter performance was the best since 2018. Earnings per share of 79 cents topped the Zacks Consensus Estimate by nearly 65%, making five straight quarters of positive surprises. The average beat over the past four quarters was more than 56%. The result also marked a substantial improvement over the previous year’s loss of 23 cents.

Revenues of $2.87 billion topped the Zacks Consensus Estimate by nearly 7.9%, while also advancing from $2.38 billion a year earlier. The company attributed these results to higher aluminum and alumina prices, along with increased shipments.

The coming economic boom should mean big things for Alcoa moving forward. Analysts have been raising their expectations based on these strong results. The Zacks Consensus Estimate for this year has jumped 158% over the past two months to $4.20, while next year has climbed 253% in that time to $3.78.

For the moment then, analysts are expecting a profit decline for 2022 over 2021. However, we’ve still got most of this year to go, and its apparent that expectations for next year are coming on strong.

These upward revisions have made AA a Zacks Rank #1 (Strong Buy). Shares have jumped approximately 74.6% this year, while soaring more than 440% over the past 12 months! As part of the metal products – distribution space, AA is in the top 11% of the Zacks Industry Rank.

Ultra Clean Holdings (UCTT)

Earnings estimates for Ultra Clean Holdings (UCTT) have spiked in the past seven days since the company’s first-quarter results last week. However, that’s nothing new for this semiconductor equipment services company, which has now beaten the Zacks Consensus Estimate for nine consecutive quarters.

UCTT is a developer and supplier of critical subsystems for the semiconductor capital equipment, flat panel, solar and medical device industries. As part of the electronics – manufacturing machinery industry, it’s in the Top 16% of the Zacks Industry Rank. Shares are up nearly 50% so far in 2021 and approximately 170% over the past 12 months.

Anything having to do with semiconductors is a good place to be right now. Chip demand accelerated in the stay-at-home environment to such an extent that there’s now a shortage. Therefore UCTT is on the right side of both supply and demand, which lead to a strong first quarter report.

Earnings per share of 92 cents beat the Zacks Consensus Estimate by 10.8%, bringing the four-quarter average surprise to 26.8%. The result was also a sharp improvement over the previous year’s 52 cents. Revenue of $417.6 million topped our expectation by more than 7% and advanced from the previous year’s $320.9 million.

For the second quarter, UCTT sees revenue between $490 million and $520 million with non-GAAP net income of 90 cents to $1.03.

One of UCTT’s big moves in the past several months was the acquisition of Ham-Let, a global leader in the development, manufacturing and distribution of Ultra-High Purity and industrial flow control systems. These include things like valves, fittings, hoses and connectors used in manufacturing semiconductor devices. The move expands UCTT’s semiconductor addressable market by more than $2 billion.

The Zacks Consensus Estimate for this year rose 13.9% over the past 30 days to $3.86, while expectations for next year jumped 15.3% in that time to $4.38. Therefore, analysts currently expect year-over-year improvement of 13.5%.

Discover Financial Services (DFS)

Companies with a strong digital presence had a head start on the pandemic-era economy. That was true whether you sold clothes, computers or consumer loans. Late last month, Discover Financial Services (DFS) reported solid fiscal first-quarter results due in large part to its digital banking model.

DFS is a direct banking and payment services company that offers credit cards; personal, student & home loans; and deposit products. The Direct Banking segment accounted for 88.3% of pretax income in 2020, while the Payment Services segment made up the remaining 11.7%.

As part of the financial – consumer loans space, DFS is in the top 16% of the Zacks Industry Rank. Shares are up approximately 190% over the past 12 months, including nearly 30% so far in 2021.

In late April, the company reported its third straight positive surprise. Fiscal first quarter earnings per share of $5.04 beat the Zacks Consensus Estimate by a hefty 75%. It also improved substantially from a loss of 25 cents a year earlier. Revenues of $2.8 billion were down slightly year-over-year, but topped our expectation by 1.3%.

The company attributed its results to “sustained credit performance, robust sales growth and solid execution on operating & funding costs”.

It’s strong and diversified Direct Banking business was a real standout in the quarter. Along with its global expansions and strong balance sheet, DFS looks set to hit the ground running as the economy slowly but surely gets back on its feet.

DFS made many cost-curbing initiatives to stay healthy during this pandemic, which included reducing account acquisition expense, cutting down on brand awareness activities, and lowering the vendor and technology spending.

With a strong banking business and prudent management, analysts have been boosting their expectations over the past 60 days. The Zacks Consensus Estimate for this year is up 43.2% in that time to $12.87, while next year has advanced 10.7% to $11.30.

Zacks Top 10 Stocks for 2021

In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?

Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.

Access Zacks Top 10 Stocks for 2021 today >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Ultra Clean Holdings, Inc. (UCTT) : Free Stock Analysis Report

Discover Financial Services (DFS) : Free Stock Analysis Report

Alcoa Corp. (AA) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research