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Investing Your Stimulus Check? Buy 3 Top Stocks

By Brian Feroldi – Apr 19, 2020 at 8:00AM

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These high growth stocks are attractively priced and have incredibly bright futures ahead.

The COVID-19-inspired economic stimulus package -- which topped out at $2.2 trillion -- was signed into law a few weeks ago. Households that qualify might receive as much as $1,200 per adult and $500 per qualifying child.

If you're able to invest that money in growth stocks instead of spending it, Alteryx (AYX -2.83%), Etsy (ETSY 2.48%), and Autodesk (ADSK 0.66%) should be at the top of your shopping list. Here's why.

10 dollar bill in pocket

Image source: Getty Images.

Alteryx

Alteryx is a software-as-a-service company that sells self-service data analytics tools. The company makes it easy for almost anyone to analyze large sets of data in order to make actional decisions.

Alteryx has been identified by third parties like Gartner as the market leader, which is helping it attract customers. Last quarter, Alteryx's customer base grew 30% to 6,087. Even better, its dollar-based net expansion rate -- which measures the same customer spending from period to period -- jumped 130%. The combination enabled revenue to grow 65%, gross margin to expand, and net income to surge 65%.

Management doesn't think that the growth rate is going to slow down anytime soon. Management believes that revenue will jump at least 33% in 2020, although it's worth noting that the guidance was issued in February before the COVID-19 pandemic kicked into high gear.

While Alteryx's stock can't be called cheap -- shares trade for 18 times sales and 152 times forward earnings -- the stock is actually down 25% from its recent high. Believe it or not, I think this company is so high-quality and can grow for so long that the stock is actually in bargain territory today.

Etsy

Etsy, which is a leading online marketplace for handcrafted goods, continues to prove that Amazon isn't the only company that is riding the e-commerce boom.

Last quarter, Etsy's active buyers grew 16% and active sellers grew 20%. Gross merchandise sales -- which measures total spending on its platform -- expanded 33% to $1.65 billion. The surging popularity enabled revenue to grow 35% to $270 million. While net income actually declined 24% to $31.3 million, the step backward was entirely self-inflicted (management is ramping up marketing costs to drive growth). 

In the year ahead, management forecasted that the top line would grow at least 27%. I think that there's reason to believe the company is sandbagging. After all, tens of millions of consumers are trapped in their homes right now due to shelter at home orders. That might be a strong catalyst that convinces buyers to give the site a try for the right time and convinces others to finally start their own Etsy business.

Meanwhile, Etsy's stock is down more than 17% from its recent high and currently trades for less than nine times sales and about 37 times free cash flow. That's not dirt cheap, but I think it's an attractive price for a company that should be able to grow at a double-digit pace for many years.

Autodesk

If you're an engineer, architect, designer, or construction professional, then the odds are good you depend on Autodesk to do your job. Autodesk sells a suite of computer-aided design (CAD) software products that allows creators to produce 3D models of whatever they can dream up.

Autodesk went through the painful transition to a software-as-a-service (SaaS) business model a few years ago, which cost the company revenue and profits in the short term but sets it up for long-term success. What's exciting is that the company is still in the middle of converting its massive user base to the new model. At last count, more than 18 million people use Autodesk's products, but only five million of them are paying subscribers. That gives the company a huge untapped pool of subscribers that it can gradually convince to upgrade.

Market-watchers expect that Autodesk will be able to grow its bottom-line in excess of 80% over the next five years, which is a remarkably fast growth rate for a company that only trades for 37 times forward earnings. Shares are also still down more than 18% from their recent high. I think that's far too good of a deal to pass up.

 

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Brian Feroldi owns shares of Alteryx, Amazon, Autodesk, and Etsy. The Motley Fool owns shares of and recommends Alteryx, Amazon, and Etsy. The Motley Fool recommends Autodesk and Gartner and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Autodesk, Inc. Stock Quote
Autodesk, Inc.
ADSK
$205.87 (0.66%) $1.34
Etsy, Inc. Stock Quote
Etsy, Inc.
ETSY
$115.11 (2.48%) $2.78
Alteryx Stock Quote
Alteryx
AYX
$56.94 (-2.83%) $-1.66
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$120.30 (-0.54%) $0.65
Gartner, Inc. Stock Quote
Gartner, Inc.
IT
$300.76 (0.33%) $0.98

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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