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2 Superstar Stocks for Your 401K

With the stock market racking up record highs this year, investors are diving in to grab any and every opportunity to capitalize on its momentum. There has also been a massive spike in workers' contributions to their 401K plans. So, to benefit from the market rally and to swell one’s 401(k) balance, we think winning stocks Infosys (INFY) and Cintas (CTAS) could be great picks now. Let’s take a closer look.

Many investors pulled money from the stock market last year on concerns over the pandemic-led recession. But as the economy recovers and stock market indexes are hitting their all-time highs, investors are unwilling to miss opportunities to capitalize on the momentum. According to the latest data from Fidelity Investments, even though people faced financial hardships over the past year due to the pandemic, retirement account balances have hit new highs. The average 401K plan balance climbed 24% year-over-year and hit $129,300 as of June 30, while individual retirement account balances increased by 21% from their year-ago value.

The S&P 500 doubled this month on a closing basis from its pandemic low on March 23, 2020. And this bull run is expected to continue for the foreseeable future owing to an improving job market, rising consumer spending, and continuing government efforts to increase COVID-19 vaccination rates.

So, we believe investors seeking to boost their 401(k) balances further could bet on Infosys Limited (INFY) and Cintas Corporation (CTAS). These companies are fundamentally sound and exhibit strong growth attributes.

Infosys Limited (INFY)

Headquartered in India, INFY offers consulting, technology, outsourcing, and next-generation digital services. It offers application development and management, product engineering and management, infrastructure, enterprise application, and support and integration services. In addition, it has collaboration agreements with Rolls-Royce, BP plc, Newmont Corporation, RXR Realty, Majesco Limited, and Centre for Accessibility Australia.

Last month, INFY and Select Portfolio Servicing Inc. (SPS) renewed their strategic partnership to deliver Hitachi Vantara's Cobalt-powered infrastructure as a service (IaaS) solution. INFY will now provide SPS with next-generation hybrid cloud, infrastructure, and application services for the next five years.

Also last month, INFY introduced a new set of Enterprise Agile DevOps capabilities to help companies improve customer centricity and creativity. The product-centric value delivery model and the data-centric live engineering methodology are the two features that should enable enterprises to drive business value faster while being secure by design.

During its first fiscal quarter, ended June 30, 2021, INFY’s revenue increased 21.2% year-over-year to $3.78 billion. Its operating profit grew 26.6% from its year-ago value to $896 million. The company's net income increased 26.2% year-over-year to $704 million. In addition, its EPS increased 30.8% year-over-year to $0.17 over this period.

A $0.69 consensus EPS estimate for the current year represents a 13.1% improvement year-over-year. The $15.75 billion consensus revenue estimate for the current year represents a 16.2% increase from the same period last year. INFY’s stock has gained 84% over the past year and 38.9% year-to-date.

INFY's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

INFY has also received an A grade for Quality and Stability, and a B for Momentum. In addition, it is ranked #7 of 13 stocks within the A-rated Outsourcing – Tech Services industry.

To see additional POWR Ratings for Growth, Value, and Sentiment for INFY, click here.

Cintas Corporation (CTAS)

CTAS offers primarily corporate identity uniforms and related business services in the United States, Canada, and Latin America. Uniform Rental and Facility Services; First Aid and Safety Services; and All Other segments are the operational segments of the Cincinnati, Ohio-based company.

Last month, CTAS was ranked sixth on the 2021 Selling Power 50 Best Companies to Sell For list. CTAS climbed from 27th place in 2013 to sixth place this year on Selling Power's ranking.

CTAS’ revenue increased 13.3% year-over-year to $1.84 million in the fourth quarter, ended May 31, 2021. Its operating income surged 71.8% year-over-year to $356.45 million. The company's net income increased 85.2% from the year-ago value to $267.72 million over this period, while its EPS increased 83% year-over-year to $2.47.

The company’s EPS is expected to grow 4.5% year-over-year to $10.7 in its fiscal year 2021. Analysts expect CTAS’ revenue to increase 7.1% year-over-year to $7.2 billion in the current year. The stock surged 22.9% over the past year and 14.3% over the past three months.

CTAS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. CTAS also has an A grade for Stability and Quality. The stock is ranked #16 of 47 stocks in the B-rated Outsourcing – Business Services industry.

Beyond the POWR Ratings grades I have just highlighted, you can see the CTAS ratings for Growth, Value, Momentum, and Sentiment.

INFY shares were trading at $23.84 per share on Friday afternoon, up $0.29 (+1.23%). Year-to-date, INFY has gained 41.89%, versus a 19.17% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.


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