The Wall Street firms that we cover are starting to agree that, while the future may still be bright for the U.S. economy, despite the lurking presence of inflation, the future also may be one of stock market gains that are much lower than what we have seen over the past decade. When that is the case, then investing strategies often shift from indexing to a more disciplined stock-picking routine. That’s when investors need solid growth ideas.
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Jefferies highlights its top growth stocks to buy each week, and this week is no exception. While these stocks are better suited for investors that have a somewhat higher risk tolerance, they all have outstanding upside potential and make good sense now. Plus, given the product lines and services of the companies, they should hold up better into a stiff sell-off.

It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Callaway Golf

Interest in golf has returned in 2021, and this is a premier way to play the industry. Callaway Golf Co. (NYSE: ELY) engages in the manufacture and distribution of golf equipment and accessories. It operates through the following segments.

The Golf Clubs segment comprises Callaway Golf woods, hybrids, irons and wedges; Odyssey putters, including Toulon Design putters by Odyssey; and packaged sets and sales of pre-owned golf clubs. The Golf Balls segment designs, manufactures and sells Callaway Golf and Strata golf balls.

The Gear, Accessories & Other segment consists of soft goods products, such as golf apparel and footwear, golf bags, golf gloves, travel gear, headwear and other golf-related accessories, as well as retail apparel sales from the firm’s joint venture in Japan, and OGIO branded products.

Jefferies loves the setup of the company:

The company raised its third quarter and fiscal year sales and adjusted EBITDA guidance, reflecting a shift in production from Vietnam, better-than-expected results in Topgolf as well as apparel brands, and a deferral of certain planned operating expenses. We highlighted two key positives that add confidence to our bullish view:

1) Topgolf saw outperformance from both walk-in and events in spite of the Delta variant.

2) The company is seeing outperformance in Jack Wolfskin, which we noted has the opportunity to alleviate a lingering EBITDA headwind. We updated our fiscal year sales and adjusted EBITDA estimates to $3.094 billion and $390M million up from $3.055 billion and $360M million.

Jefferies has a $49 price target on Callaway Golf stock. The Wall Street consensus target is just $40.00, and Wednesday’s closing share price was $30.09.

This company suffered a stunning security breach a few years ago and has fought back to be much stronger. Equifax Inc. (NYSE: EFX) provides credit and risk management solutions to businesses and consumers. The second-largest U.S. credit bureau (based on revenue), the company also operates in 19 other countries.
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Equifax has amassed data on approximately 820 million consumers, 91 million businesses, 280 million employee files, 201 million public records and 5.8 billion trade accounts. Products and services include consumer reports, risk scoring and analytics, income and employment verification, decisioning services and marketing services.

The Jefferies report had this to say:

We were out with our takeaways from meetings we hosted with senior management. We pointed out that the focus of the tech transformation continues to be accelerating New Product Innovation and the vitality index which is expected to be ~8% in 2021. Further, we noted that as of Q2, Equifax Work Solutions (EWS) has 119 million records on 91 million unique social security numbers which is ~50% of non-farm payrolls. To that point, we believe there are many different growth levers the company is pulling to grow EWS from 40%+ of the portfolio to 50%+. Within mortgage, we expect a meaningful decline in the second half of 2021,but think it will normalize over time..

The $316 Jefferies price target is well above the $277.94 consensus target. The final Equifax stock trade on Wednesday was reported at $273.11.

Leslie’s

A rocky economy and a declining stock market will not stop people who need to take care of their swimming pools and hot tubs. Leslie’s Inc. (NASDAQ: LESL) operates as a direct-to-consumer pool and spa care brand in the United States.

The company markets and sells pool and spa supplies and related products and services, which primarily consist of maintenance items, such as chemicals, equipment and parts, and cleaning and maintenance equipment, as well as safety, recreational and fitness-related products.

Leslie’s also provides essential services, such as on-site equipment installation and repair to the ongoing maintenance of pools and spas; complimentary, commercial-grade and in-store water testing and analysis, as well as AccuBlue water testing services; and a mobile app. As of January 2, 2021, the company operated 936 locations in 37 states and e-commerce websites. It serves residential, professional and commercial consumers.
Leslie’s posted sparkling quarterly results, and the analysts said this:

We were out with our takeaways following meetings with management. While pool usage will likely decline from peak COVID levels, mgmt noted that growth in the US pool owner installed base and market share gains are larger contributors to the company’s chemical/equipment demand. Further, while smaller peers have had challenges procuring chlorine tabs, the vast majority of Leslie’s locations are in-stock. And with industry supply constrained through pool season 2022 we think the company’s vertical integration and aggressive procurement strategy render them well-positioned. Moreover, we noted that heading into next pool season, Leslie’s has purchased more than ever from its top 3 equipment providers, an indicator of a strong demand pipeline.

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The Jefferies price target on Leslie’s stock of $39 is higher than the $32.25 consensus target. The final print for Wednesday was reported at $22.61 a share.

Synchrony Financial

This may be the perfect value financial for a growth portfolio. Synchrony Financial (NYSE: SYF) is one of the nation’s premier consumer financial services companies. It is the self-described largest provider of private label credit cards in the United States, based on purchase volume and receivables.

Synchrony Financial provides a wide range of credit products through programs established with a diverse group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and health care service providers to help generate growth for its partners and offer financial flexibility.

Top analysts have noted in the past that private label cards are gaining share, and their research suggests a continuation of that trend. They also note that retailers continue to push back on rates, and private label cards offer more of a symbiotic relationship for retailers. Jefferies discussed its prospects:

We were out with our takes from the company’s Analyst Day. We believe that Synchrony Financial’s broad product suite in combination with its data and analytics platform and technology stack enable the company to compete within the buy now, pay later segment while also creating a higher lift for retail partners while at a substantially lower cost. Long term we believe the company is well positioned for growth given its diversified product set, strong digital platform and growth channels. Additionally, we consider the 7%-10% receivables growth as very achievable in the context of recent partner additions, ongoing penetration at existing retailers and in the context of the company’s diversified business model.

Shareholders receive a 1.85% dividend. Jefferies has set a $58 price target, and the consensus target is $57.21. Synchrony Financial stock closed at $48.24 on Wednesday.

These four companies have posted solid results, have very strong business lines and have the ability to weather storms in the economy due to their positioning. These top growth stock picks offer good entry points for growth buyers looking to add new names that have far lower volatility than crowded momentum stocks.

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