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2 growth stocks that just crushed earnings

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Small businesses are very sensitive to the state of the economy. They are closely linked to local communities and therefore do not have the level of reach, scale or access to capital that large companies have. So when the economy falters, they are often the first to suffer. Conversely, when times are good, we tend to see a boom in opening new businesses.

While it is not always possible to buy stakes in smaller companies, there are large cap companies whose success is directly related to the general health of those companies. For example, Intuit (NASDAQ: INTU) and Bill.com Holdings (NYSE: BILL) providing software to small and medium businesses to make accounting and back office operations more manageable.

Both have just released strong fiscal results for the full year, suggesting that small businesses are thriving in the current economic environment.

Online accounting speeds up at Intuit

Having a full-time accountant is not profitable for most small businesses. Intuit owns Quickbooks, an affordable accounting program that allows millions of business owners to skip the accountant’s desk and focus on what they do best. The software can automate transaction reconciliation, generate invoices, and manage cash flow.

Image source: Getty Images

Intuit also has a growing consumer business with its TurboTax software, which helps individuals and families process their tax returns. Additionally, it opened up a whole new source of income through its acquisition of Credit Karma, which provides consumers with free credit reports in exchange for their data.

But it’s the small business and self-employed segment that generates the most income, and it’s also the fastest growing.

Intuit Segment

Revenue for fiscal year 2020

Revenue for fiscal year 2021

Growth

Small business

$ 4.05 billion

$ 4.68 billion

16%

Consumer

$ 3.13 billion

$ 3.56 billion

14%

Data source: Company deposits. Intuit’s 2021 fiscal year ended on July 31.

The company had $ 1.38 billion in other income, including $ 865 million from Credit Karma.

Notably, revenue growth in the online accounting sub-segment of Quickbooks has outpaced overall growth. This part of the business includes the most popular accounting products with small businesses, so its revenue gains could mean more people have taken the business leap in the past 12 years. months, a sign of stronger confidence in the economy.

Intuit sub-segment

Revenue for fiscal year 2020

Revenue for fiscal year 2021

Growth

Quickbooks Online Accounting

$ 1.35 billion

$ 1.69 billion

25.4%

Data source: company deposits

Intuit generated $ 9.74 per share in non-GAAP earnings for its 2021 fiscal year, which ended July 31, an increase of 23.9% over fiscal 2020. For Intuit, the earnings Non-GAAP is a more useful measure than the GAAP figure because the company had significant one-time costs. Using non-GAAP results allows the business to exclude these one-time expenses, which in this case provides a clearer picture of its overall performance.

With a stock price of $ 552 at Thursday’s close, the stock was trading at 56 times FY2021 earnings. That looks expensive compared to the larger Nasdaq 100, which is trading at a P ratio. / E average of 35. However, there might not be a better way to play the comeback of small businesses. If you’re optimistic about the economy in the long run, Intuit is a great bet.

Bill.com offered explosive advice

Bill.com is the ultimate payment management platform for businesses, and it’s hosted in the cloud, so customers can take action from anywhere, across multiple devices.

A small business owner cutting the ribbon at their grand opening

Image source: Getty Images

Businesses send and receive many invoices, and sometimes they are missed, lost, or sent to the wrong destinations. Bill.com’s digital inbox routes all a business’s invoices to one place and pays them with just one click. In addition, it integrates with accounting software to automatically record transactions.

Bill.com targets small and medium-sized businesses both directly and through its partnerships with 85 of the top 100 US accounting firms and six of the 10 largest US financial institutions. This strategy paid off in its 2021 fiscal year, with strong growth in revenue and payment volume on its platform.

Metric

Fiscal year 2020

Fiscal year 2021

Growth

Payment volume

$ 25 billion

$ 42 billion

64%

Returned

$ 158 million

$ 238 million

51%

Customers

98,000

121,000

24%

Data source: company deposits

But for its fiscal fourth quarter, which ended June 30, revenue growth was even stronger, suggesting there is an acceleration as the economy as a whole warms up.

Metric

Tax Q4 2020

Fiscal year Q4 2021

Growth

Returned

$ 42 million

$ 78 million

85%

Data source: company deposits

However, investors should be more excited about the company’s forecast for fiscal 2022. Bill.com estimates it will generate up to $ 480 million in revenue, which would represent growth of over 100%.

The company is not yet profitable, but analysts expect it to be close to breaking even in fiscal 2022. Based on the price / sell ratio, the stock looks expensive, rising. trading at a multiple of 76, but looks a bit more reasonable at 38 times the FY2022 income estimate. And with high gross margins, the stock might look like an even better buy for long-term investors on a P / E basis once profits are realized.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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