We recently compiled a list of the 8 Best Cheap Growth Stocks To Invest In Now. In this article, we are going to take a look at where Fidelity National Information Services, Inc. (NYSE:FIS) stands against the other cheap growth stocks.
What Should Your Portfolio Look Like in the Current Bull Market
The current market data shows that the economy of the United States is normalizing, especially with an active Federal Reserve, global stimulus from China, and higher consumption rates. In one of our recent articles, 7 Best Low Cost Stocks To Buy Under $50, we talked about the areas that could potentially benefit the most in the current bull market. We also discussed points of view from different analysts. Here is a piece from the article:
“The Fed rate cut and the Chinese stimulus are expected to affect the market positively. Adam Parker, Trivariate Research founder and CEO; Lauren Goodwin, New York Life Investments chief market strategist; and Kristina Hooper, Invesco chief global market strategist joined CNBC recently to talk about the best opportunities in the current bull market.
Adam Parker expressed that the market is outpacing the Federal Reserve’s action. He highlighted a sense of optimism surrounding AI deployment over the next few years, but he also raised concerns about market valuations exceeding economic realities. Parker likes the healthcare sector as it is driven by AI and believes that this will put the industry in a leading market position. He also believes that the Chinese Stimulus is a positive sign for the energy and industrial sectors.
On the other hand, Lauren Goodwin talked about how the rate cuts are supposed to affect the market. She thinks growth is the key indicator while analyzing the market. When the Fed is cutting rates, profit, and earnings margins typically stay where they are until growth starts to slow down. Moreover, she also pointed out that it is difficult to see the real economic catalyst that gives growth an upstart, without inflation. She also thinks that the upcoming period is going to be volatile between growth kicking up and then slowing down. Goodwin mentioned that she is going to be the buyer of the rally until unemployment starts rising and growth becomes a problem.”
Gabriela Santos, JPMorgan Asset Management’s chief market strategist, joined CNBC recently to talk about how investors’ portfolios might not be adequately adjusted to align with the current economic normalization, particularly in fixed-income allocations.
Santos emphasized that a proactive Federal Reserve, ongoing U.S. economic expansion, and stimulus from China create a favorable environment for risk assets to perform well. Santos highlighted that portfolios typically hold only about 36% in core fixed income, while she believes a more appropriate range is 65% to 75%. She suggested reallocating cash into credit rather than equities, focusing on investment-grade bonds and securitized debt.
Moreover, she thinks that within equity as well portfolios are overly emphasized on growth and technology stocks, whereas there lies significant potential outside of these industries. Gabriela Santos also pointed out that consumer spending remains robust, tracking around 3% to 3.5%. This resilience supports the notion of a “soft landing” for the economy. She also noted that it is a good sign that the market is less concerned about inflation, and instead, the focus is now more on consumer spending data, which has been tracking around 3% to 3.5% during the current quarter.
Our Methodology
To compile the list of 8 best cheap growth stocks to invest in now, we used our previous articles and Finviz screener. Using these two sources we shortlisted 20 growth stocks from industries including Technology, Biotech, Healthcare, and Renewable energies among others. We made sure that we only selected stocks that were trading below the forward price-to-earnings ratio of 23.98 (the market’s forward P/E as per the Wall Street Journal) with earnings expected to grow during the year. Next, we ranked these stocks based on the number of hedge fund holders in Q2 2024. The list is ranked in ascending order of the number of hedge fund holders.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A financial analyst monitoring the stock market, with multiple screens of varying sizes and colors.
Fidelity National Information Services, Inc. (NYSE:FIS)
Forward P/E Ratio: 16.21
Earnings Growth This Year: 51.30%
Number of Hedge Fund Holders: 59
Fidelity National Information Services, Inc. (NYSE:FIS) is a global financial technology company. It provides Banking Solutions, Capital Market Solutions, Payment processing, and consulting and outsourcing services to banks of all sizes. The company operates in more than 100 countries with more than 20,000 clients.
Fidelity National Information Services, Inc. (NYSE:FIS) operates in a high-demand market enabling financial organizations to manage and move more than $9 trillion annually. It is improving its footprint and is on track for a record core signing in 2024. The Digital Banking wing of the company is also gaining more traction as it improved its new digital sales by 30% during the first half of 2024.
Financially speaking, the financial technology company does not fail to impress here either. It has grown its adjusted revenue by 4% year-over-year to reach $2.5 billion. While the revenue from Capital Markets was the strongest contender in growth, the Banking Solutions segment also grew 3% during the same time.
Fidelity National Information Services, Inc. (NYSE:FIS) also enjoys significant recurring revenue which accounts for around 81% of the total revenue. This helps the company generate significant cash flow. During the second quarter of 2024, it generated more than $504 million in free cash flow while capital expenditure was low at only 7% of the total revenue.
This financial technology company is trading at only 16 times its forward earnings, making it one of the best cheap growth stocks to invest in now.
Invesco Growth and Income Fund stated the following regarding Fidelity National Information Services, Inc. (NYSE:FIS) in its Q2 2024 investor letter:
“Given that many equity indexes reached record highs, valuation opportunities were limited and portfolio activity was somewhat muted. We purchased new holdings in financials, health care and IT. Fidelity National Information Services, Inc. (NYSE:FIS): The company is a leading global provider of financial services technology solutions for financial institutions, businesses and developers. The company has lagged its peers in recent years due to numerous acquisitions that increased its debt. However, a new CEO and CFO have made efforts to right size the firm and refocus on its core banking and capital market businesses by selling a partial stake in a recent acquisition. As a result, we believe the company should be able to increase selling opportunities, grow earnings and potentially return capital to shareholders.”
Overall FIS ranks 4th on our list of the cheap growth stocks to invest in. While we acknowledge the potential of FIS as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.