The Earnings Elite: 3 Stocks With Jaw-Dropping Profit Potential

Stocks to buy

Some growth stocks have reported exceptional earnings that have investors excited about future earnings reports. While some companies report high revenue and rising net losses, others can grow their top and bottom lines.

It’s possible to find companies achieving double-digit year-over-year revenue growth that also have high net profit margins. Pinpointing these investments before they become mainstream can unlock the doors to outperformance. These are some of the promising stocks to buy that can generate massive profits for investors.

Arista Networks (ANET)

Image of Arista Networks (ANET) logo on the side of a building

Source: Sundry Photography / Shutterstock.com

Arista Networks (NYSE:ANET) is in a good position to capitalize on the artificial intelligence (AI) boom and deliver value to shareholders. The company’s data center solutions have attracted big customers like Meta Platforms (NASDAQ:META) and Microsoft (NASDAQ:MSFT). These two companies have deep pockets, and AI is a critical component of their future plans. That dynamic increases the likelihood of them continuing to work with Arista Networks for many years to come.

The company delivers software-driven cloud networking solutions and has rewarded investors with high returns. Shares are up by 98% over the past year and 280% over the past five years.

Arista Networks reported 20.8% year-over-year revenue growth in Q4 2023 and ramped up its net income from $427.1 million to $613.6 million. That’s a 43.7% year-over-year increase. The company is still growing at a fast pace and closed the quarter with a 39.8% net profit margin. ANET currently trades at a 41 P/E ratio.

E.l.f. Beauty (ELF)

an elf branded beauty product on a stone counter

Source: Lisa Chinn / Shutterstock.com

E.l.f. Beauty’s (NYSE:ELF) revenue growth came in at an impressive 85% year-over-year in Q3 FY24, and net income grew by 40.7% year-over-year. That successful quarter prompted the company to raise its fiscal 2024 outlook. The midpoint of adjusted net income jumped from $145 million to $165 million in fiscal 2024 guidance. That’s a 13.8% increase.

The company has a reputation for exceeding guidance and raising its forecasts. It also hiked its net sales projection from a $901 million midpoint to a $985 million midpoint. The new midpoint is 9.3% higher than the new one.

Guidance implies net income will grow at a faster rate than revenue. That’s good for investors seeking higher profits, especially with revenue growth still coming in strong.

E.l.f. Beauty differentiates itself from other beauty brands by excluding unethical ingredients from its beauty products. The company is gaining market share rapidly and has been a big hit among Gen Z.

Chipotle (CMG)

a pedestrian walks past a Chipotle

Source: Northfoto / Shutterstock.com

Chipotle (NYSE:CMG) has served up tasty returns for long-term investors. Shares are up by 78% over the past year and have gained 334% over the past five years. Revenue and earnings growth rates are both in the double digits, but net income is growing at a faster rate.

Chipotle reported 15.4% year-over-year revenue growth in Q4 2023 and opened 121 new restaurants during the quarter. Most of those locations, 110, include a Chipotlane — a fast-growing segment for the company. Diluted earnings per share went from $8.02 to $10.21 per share, indicating a 27.3% year-over-year increase.

Chipotle has plans to open 285 to 315 new restaurants in 2024. The 300 restaurant midpoint is a 10.7% year-over-year improvement from the 271 new restaurants opened in 2023.

Chipotle is charging toward a $100 billion market cap and could reach that level soon. Shares currently trade at a $72 billion market cap and a 49-forward P/E ratio.

On this date of publication, Marc Guberti held long positions in ANET and ELF. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.

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