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Steven Cress' Top 2025 Stocks (undefined:CLS)

Steven Cress’ Top 2025 Stocks (undefined:CLS)

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Quant titan Steven Cress shares his top stocks for 2025, beginning with Celestica (0:45). Intapp’s very strong liquidity and balance sheet (3:00). Why Credo Technology Group Holdings is his number 1 pick (5:15). PEG and why not all metrics are created equal (9:30). Watch the full video here with slides.

Transcript

Daniel Snyder: Welcome back, I am so thankful that you’re here. Steven Cress outperformed the markets last two years, and I want to introduce the Quant Titan himself, Steven Cress. Steve, thank you so much for the time joining us today.

Steven Cress: Daniel, thank you so much and thank you to everyone who’s attending and watching.

DS: Let’s dive into it. I know there’s a lot in this conversation. You’re going to go over overviews and get into the picks, so let’s hit it.

SC: A stock that I really like a lot and have for more than a year, Celestica, ticker symbol, (NYSE:CLS). Has a market cap of $11.27 billion. Many of our subscribers are probably familiar.

And if you’re an Alpha Picks subscriber, you probably recognize this name. This company comes within the IT sector, currently ranks #10 out of 550 stocks in the sector. And within electronic manufacturing services, it actually ranks #1 out of 16 stocks in that industry. They are a leader in supply chain solutions, and they’re one of the largest electronic manufacturing services companies, and Canadian as well. They had one of the largest IPOs in Canada ever.

Company has some really fantastic numbers. The stock was up 240% over the last 52 weeks. Don’t let that performance scare you because it’s got some great numbers.

Also, I will mention, this company has been around for a long time. It’s about 75 years. The stock has had tremendous performance, but when you look at that valuation, you can actually see it’s at a B- now. And six months ago, it was a C+. So the valuation for the company is actually more attractive now than it was six months ago.

That’s why you can’t let stock price appreciation deter you. You need to look at the company versus its sector on a valuation basis, a growth basis, and a profitability basis. And, of course, at Seeking Alpha, we like to focus on momentum and analyst revisions versus the sector.

And as you can see, Celestica has a great report card with many grades being in the green. We have a Strong Buy on it, but Wall Street also likes the stock. It has a Buy rating, as well as Seeking Alpha contributors with the Buy rating.

A little bit more on Celestica. We’ll just highlight some of the Q3 numbers that came out in terms of where the revenues are from. You can see, the ATS segment of it was sequentially up 6%. CCS was up 4%. Communications, overall, was up 14%. However, their Enterprise business was down about 10%. So, this just gives you a little description on the various revenue numbers for the company, but, of course, stellar overall.

Number two, Daniel, Intapp, ticker symbol, (NASDAQ:INTA). This has a market cap of about $4.93 billion. Of course, a Quant Strong Buy. It’s in the IT sector and it ranks #14 out of 550 stocks in the IT sector. Within its industry, it is application software, and there, it comes #3 out of 196 stocks.

It is a leader in their services and very, very focused empowering AI solutions. Hence, one of the reasons why the stock is really in the right place at the right time, and it’s tailored for professionals and the financial service industry. The company has a strategic partnership with Microsoft (MSFT) that drives their co-innovation.

As I mentioned, it leverages AI as well as their vendors, and it’s got a client base for co-marketing and targeted verticals. It’s got a strong acquisition history as well, including acquiring DealCloud for relationship management.

The company has a very strong customer pipeline and multiple drivers of that pipeline as well. For fiscal year 2024, the company grew $100,000 ARR for clients at 16% hitting $1 million in ARR, which grew at 38% versus fiscal year ’23.

Net revenue grew 119% for a trailing 12-month period for its cloud businesses. And it also has expanding capabilities in terms of its global reach and its new solutions businesses. Very strong liquidity and a very strong balance sheet.

As you look at the factor grades, you could see the valuation, it’s in line versus the sector, but the growth versus — and mind you, this is the IT sector as well. Growth versus the IT sector is A+. So, very, very strong growth versus the IT sector.

Profitability, very strong as well at B, and momentum and EPS revisions both coming at A versus the sector. So this is a stock that we have at number two for our top 10. And I will mention just a couple other highlights. Leveraged free cash flow grew 84% year-over-year, working capital growth, a whopping 3,000%, and forward EBITDA growth at 89%. So, very, very strong growth numbers for this company.

And our number one stock, Daniel…

DS: Let’s get into it.

SC: …for 2025, Credo Technology Group Holdings, ticker symbol, (NASDAQ:CRDO). It comes in with a market cap of $12 billion. In the IT sector ranking #4 out of 550 stocks.

In the semiconductor industry, it ranks #6 out of 66. The company offers a very strong historical innovation in terms of what it brings to the sector and they’re a pioneer in many of their new technologies. Their focus is on high-speed connectivity solutions, which is very important in this day and age of data centers and bringing data to individuals. They want it at a high speed.

You can see that there was 300% growth in the stock price. Very strong revenue, they have excellent margins, and very strong tech tailwinds as well.

For the second quarter, EPS came in at $0.07, and it beat by $0.02, and revenue came in at $72 million, which was up 21% sequentially and up 63% year-over-year. So, IT sector, typically very strong, but this is — the numbers here are definitely stronger versus the sector.

Forward ROE growth is a whopping 93%. And the IT sector, ROE growth is actually in the negative domain, negative 4.25%. So, coming in a positive 93%, completely crushing the sector in terms of the ROE growth, and that is a profitability metric.

The EPS forward long-term growth, looking three to five years out, so that’s a consensus number from analysts looking at long-term growth versus the sector, at 93% versus the sector which analysts have at 15%. So, long-term growth for this company, very, very strong. When we look at the overall growth metrics, that is a very predictive factor for future stock prices looking at that long-term growth of three to five years out.

Its market cap of $12.5 million, it is a large cap company. But being that the stock has gone up so much over the last year, up 278%, but when you look at that valuation grade at C versus six months ago at C+, not much of a difference. Looking at the growth grade of A+.

AI is – we’re going to see some volatility with the AI stocks – but AI is going to be on fire probably for the next decade. And this stock and this company is at a great place in terms of its relativeness to AI.

The Quant is a Strong Buy. It lies within the information technology sector, specifically here for semiconductors. And within the industry, you could see it ranks #2 out of 66.

So, I’m going to click on the growth metric. This looks like almost an A+ report card with the exception of one statistic, which is in the F category, that’s operating cash. But everything else that we’re looking at for its growth metrics is in the A+ category.

Revenue growth, again, A+ versus the sector, but we’re very transparent. So, you could see the revenue growth year-over-year was 48% versus the sector of 4.5%. The forward growth rate is actually even higher than the year-over-year, and we rarely see that going into 2025.

Many companies, especially if you look at the Mag 7, the forward revenue growth rates and the forward EPS growth rates are lower than year-over-year, but for this stock, it’s actually higher, and it completely crushes the sector.

Some of the data points and styles that I’m looking at are for positive growth. And you could see this has whopping revenue growth. If we go down to EBIT growth, you could see the forward EBIT growth rate is 204% versus the sector at 7.5%. And when you look at earnings per share on a forward basis, it’s 171% versus the IT sector at 7.6%. So I absolutely love the growth that we’re seeing here.

I will take us to the valuation page. Okay. So, Daniel, you’re going to see this looks a little bit different.

I’m glad that we could highlight this because this really shows the power of certain metrics. So when we look at that valuation grade, you could see it’s a C, but when you look at the underlying metrics, many of them are F. And it makes it look like this is a very expensive stock.

And on some of those conventional metrics, it really is. But I mentioned earlier in the presentation that one of my favorite metrics is PEG, and PEG combines growth with valuation. And you can see the PEG is actually a B-, and it comes at 1.58 versus the sector at 1.84.

So, Daniel, it’s important for our subscribers and people who are new to Seeking Alpha to know that not all metrics are created equal. So, at Seeking Alpha, we have back-tested many of these metrics back to 2010.

And being that I’ve been in Quant for over 35 years, my back-testing actually goes well beyond the back-testing that we did for Seeking Alpha. And we know that one of the valuation metrics that is a strong predictive factor is that PEG ratio.

So these ratios and as you’re looking at these various metrics from EV/EBITDA or price/sales or PE, some of the metrics have a higher weight than others, and that’s because we know that there’s a predictive element to it, and we weight those stocks, which historically have a better predictive value.

PEG, again, one of my favorites, is one of those metrics that has a stronger predictive value. So as a result of the weight that we have with the PEG, it actually brings up the overall valuation grade to C.

If you’re looking at the stock, again, on the conventional metrics, P/E or price/sales, it is very expensive versus the sector. We’re not hiding that. We’re very transparent. But I do want to highlight one metric that is important for valuation, and that valuation framework is PEG, hence, it brings up that overall value grade.

We’re looking at these stocks for the year as a whole for 2025. And as we saw in previous years, sometimes it takes a couple of months before these stocks perform well. A couple of quarters have to get under a company’s belt. And when we consistently see that companies have strong earnings, strong revenue grade, good profitability, investors eventually reward it, and the stocks do appreciate.

So, what I wanted to highlight here on this particular page for the earnings summary, you could see the revisions grade is a B+. This is kind of a factor that’s really unique to Seeking Alpha. Again, we’re not necessarily looking at the earnings growth here, but we’re actually looking at the quantity of analysts that are taking their numbers up or down. And you could see for the full fiscal year in the last 90 days, 10 analysts have taken their estimates up from their previous levels, and zero analysts have taken it down.

So, that’s for the full year. And for the upcoming quarter, we could see 10 analysts have taken their estimates up, and zero analysts have taken it down.

The company last year had really strong growth, and it looks like analysts have a lot of faith in this company that they’re going to continue to grow, hence, seeing, this large quantity of analysts actually bringing their estimates up and zero bringing it down.

Our contributors have a Buy in the stock. If you want to take a deeper dive, of course, I’m presenting from a data-driven perspective with Quant. We have wonderful contributors who write about the qualitative aspects of these stocks. You can pull down many of these reports that have been written and get a really deeper understanding from our contributors what they’re seeing in these stocks.

Steve’s Top 10 Stocks For 2025 article

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