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The Best Growth Stocks of March 2024
| Company (ticker) | 5-Year Avg. Yearly EPS Forecast |
|---|---|
The Vita Coco Company, Inc (COCO) | 104.1% |
Live Nation Entertainment, Inc. (LYV) | 80.3% |
Nvidia Corporation (NVDA) | 36.1% |
Full Truck Alliance Co. Ltd (YMM) | 35.9% |
Yelp Inc. (YELP) | 29.0% |
Willscot Mobile Mini Holdings Corp. (WSC) | 27.9% |
Skechers U.S.A., Inc. (SKX) | 27.3% |
T-Mobile US, Inc. (TMUS) | 26.9% |
Meta Platforms, Inc. (META) | 26.0% |
Insulet Corporation (PODD) | 18.1% |
The Vita Coco Company, Inc. (COCO)
5-Year Avg. Annual EPS Forecast
104.1%
Current 1-Year EPS
464.3%
3-Year Avg. Annual Sales
N/A
104.1%
464.3%
N/A
Why We Picked It
Vita Coco had its initial public offering in 2021. The company sells coconut water, coconut oil and other coconut-related products around the world.
COCO has been seeing exceptional growth. Analysts project that will continue, with earnings per share, or EPS, expected to increase an average of 15.8% in its next fiscal year.
The company has a “B” financial health rating from Morningstar.
The stock is trading below its 52-week high and has a price/earnings ratio of 41. Higher P/E ratios are common among top growth stocks because investors are generally willing to pay more for a company that is growing rapidly.
Live Nation Entertainment, Inc. (LYV)
5-Year Avg. Annual EPS Forecast
80.3%
Current 1-Year EPS
114.1%
3-Year Avg. Annual Sales
130.0%
80.3%
114.1%
130.0%
Why We Picked It
Live Nation Entertainment owns ticketing and booking rights for music entertainment events. It merged with ticket seller Ticketmaster in 2010.
After posting losses for many years, LYV became profitable in 2022 and has seen big earnings growth since. Analysts estimate the company will average an annual EPS increase of 41.9% over the next fiscal year and a 7.8% sales increase.
Sales have seen triple digit percentage growth over the past three years. The company has a “B” financial health rating from Morningstar.
The stock is trading below its 52-week high and its all-time 2022 high. LYV’s share price gain has outpaced the over the past decade, averaging 15.9% per year versus 12% per year for the S&P 500.
Nvidia Corporation (NVDA)
5-Year Avg. Annual EPS Forecast
36.1%
Current 1-Year EPS
585.6%
3-Year Avg. Annual Sales
53.9%
36.1%
585.6%
53.9%
Why We Picked It
Nvidia is a leading maker of computer graphics processors, chipsets and related multimedia software. Its graphics processing units are widely prized for artificial intelligence applications.
Earnings saw a big jump over the last year, and analysts anticipate that will continue with estimated 66.3% EPS growth next fiscal year on sales growth of 56.6%.
NVDA has an “A” financial health rating from Morningstar. The company is also buying back shares, which helps bolster shareholder value by reducing the number of shares outstanding. The current buyback yield is 0.6%.
Are NVDA shares pricey? The company has a P/E ratio of 71.9, which may seem high, but investors are willing to pay higher prices for exceptional growth. And that is what Nvidia has provided and, equally important, continues to promise.
Full Truck Alliance Co. Ltd. (YMM)
5-Year Avg. Annual EPS Forecast
35.9%
Current 1-Year EPS
371.4%
3-Year Avg. Annual Sales
N/A
35.9%
371.4%
N/A
Why We Picked It
Full Truck Alliance is a platform that allows trucking companies and other businesses in the logistics field to be more efficient and reduce costs. The China-based company’s software helps shippers and truckers match cargos by weight, size, available space and destinations.
The company is coming up on three years of sales and earnings data, both of which have grown each year since the company had its IPO in 2021.
Analysts project 28.6% EPS growth next fiscal year, which is below the five-year average yearly growth estimate. EPS jumped 371.4% over the last year. Sales are expected to increase 22.2% next year.
The company has a “B” financial health rating from Morningstar. The share price has traded in a narrow range since mid-2023.
While the company’s P/E ratio is 27.9, which is slightly pricier than the 23.6 for the broad market in the form of the S&P 500, YMM still has much higher growth prospects than the typical S&P 500 stock over the next five years.
Yelp Inc. (YELP)
5-Year Avg. Annual EPS Forecast
29.0%
Current 1-Year EPS
170.0%
3-Year Avg. Annual Sales
15.2%
29.0%
170.0%
15.2%
Why We Picked It
Yelp is an online platform that provides user reviews and information about businesses. Quarterly earnings per share have been erratic, moving between positive and negative since the second quarter of 2021. Earnings saw a 152% increase over the past year. Analysts project 23.4% growth of profits next year. Sales have also been rising the last three years. They are expected to climb another 9% next year.
The company has an “A” financial health rating from Morningstar and is trading at a P/E ratio of 34.7. YELP’s forward P/E ratio is 25.9. The stock is trading below its 52-week high. YELP has a buyback yield of 6.7%, but that hasn’t helped total return. The stock averaged a negative 6.1% annual total return over the last decade.
Earnings per share have climbed in the past five years and are forecast to increase at nearly double that pace in the next five years. YELP needs to make good on that outlook to justify its P/E ratio value and to regain its lofty share price high from a decade ago.
WillScot Mobile Mini Holdings Corp. (WSC)
5-Year Avg. Annual EPS Forecast
27.9%
Current 1-Year EPS
35.2%
3-Year Avg. Annual Sales
22.9%
27.9%
35.2%
22.9%
Why We Picked It
WillScot Mobile provides flexible workspace and storage solutions. Sales and EPS have been on a steady trend higher since 2020. Analysts estimate 27.5% EPS growth next fiscal year.
The company has a “B” financial health rating and is trading at a P/E of 25.0. That combined with the stock trading below its 52-week high may attract growth investors looking for a good deal.
The company has the highest buyback yield on the list at 11%. Shareholders tend to like that trend because it should help buoy individual investors’ profits by splitting them among fewer shares. The stock has performed admirably over the last decade, averaging 16.2% annual total return.
Skechers U.S.A., Inc. (SKX)
5-Year Avg. Annual EPS Forecast
27.3%
Current 1-Year EPS
46.6%
3-Year Avg. Annual Sales
20.1%
27.3%
46.6%
20.1%
Why We Picked It
Skechers is a footwear and apparel company that sells its products in approximately 180 countries.
Over the last three years sales have increased close to an average of 20% per year and EPS has increased 74.7% on average per year.
Analysts are projecting 20.2% EPS growth on sales growth of 10.5% next year. The company has a “B” financial health rating.
The stock has performed strongly over the last decade, averaging a 20.2% total return per year. The stock is near its 52-week high. P/E values have fluctuated between 6.8 and 81.3 over the last five years, and the current P/E is 18.5.
T-Mobile US, Inc. (TMUS)
5-Year Avg. Annual EPS Forecast
26.9%
Current 1-Year EPS
236.4%
3-Year Avg. Annual Sales
4.7%
26.9%
236.4%
4.7%
Why We Picked It
T-Mobile provides wireless services to over 100 million U.S. residents. Over the years, TMUS’s EPS has been erratic, seeing both big increases and declines. Analysts expect earnings growth to persist for the next several years.
TMUS has an “A” financial health rating from Morningstar. Due to earnings volatility, the P/E ratio has also been erratic, running from about 12 to above 100 over the past five years. The current reading is 25.3, with a forward P/E ratio of 16.5. However, the stock is trading near all-time highs.
At 7.1%, T-Mobile has the second-highest buyback yield on this list. That, combined with EPS and sales growth, have helped TMUS’s total return rally an average of 17.4% per year over the past decade.
Meta Platforms, Inc. (META)
5-Year Avg. Annual EPS Forecast
26.0%
Current 1-Year EPS
73.1%
3-Year Avg. Annual Sales
16.2%
26.0%
73.1%
16.2%
Why We Picked It
Meta, which owns Facebook, Instagram and WhatsApp, is also a leader in virtual reality technology. Meta saw strong earnings growth over the past year and decent sales gains too, after both had dropped in 2022. Over the last year earnings increased by 31.9% and analysts project 22.1% EPS growth on sales growth of 13.2% next year. The company has an “A” financial health rating from Morningstar.
The stock sold off in 2022 and traded down to a P/E of 7.4. After rallying throughout 2023 the P/E is now 33.0 with a Forward P/E of 21.4. Given its recent and projected earnings growth, its forward P/E ratio seems to be a fair valuation for a stock that has averaged annual total returns of 20.6% over the past decade.
Just remember, this stock has been volatile. Meta’s share price fell about 75% from mid-2021 to late 2022. Then it rallied more than 300% to near its recent all-time high.
Insulet Corporation (PODD)
5-Year Avg. Annual EPS Forecast
18.1%
Current 1-Year EPS
4,100.0%
3-Year Avg. Annual Sales
23.3%
18.1%
4,100.0%
23.3%
Why We Picked It
Insulet makes an insulin infusion system for diabetics. The company increased earnings considerably over the past year, and analysts anticipate 26.9% growth next fiscal year and even stronger average annual growth over the next five years. Sales are expected to rise 20% next year.
Annual sales have increased yearly since 2016. The company has a “B” financial health rating from Morningstar. PODD’s total return over the past decade averaged 18.5% annually versus 12.1% for the broad market in the form of the S&P 500 Index.
Having posted several years of modest earnings per share, PODD’s high P/E of 116 shows investors’ bullish sentiment. The company will need high earnings growth to justify its current valuation. Then again, this looks like a good time to buy. The stock is trading significantly below its 52-week high after declining through much of 2023.
*All data is sourced from TradeThatSwing, current as of March 7, 2024.
Methodology
This curated list of the best growth stocks aims to uncover stocks with demonstrated growth metrics that are expected to continue expanding over the next several years.
Every stock on this list trades on a U.S. exchange, has a market cap of at least $500 million and trades at least 500,000 shares per day on average, in addition to the following criteria:
- Strong forward growth expectations. Analysts expect at least 20% yearly EPS growth over the next five years, and growth next year is expected to be greater than 5%.
- Demonstrated historical growth trends. The company grew earnings by at least 20% over the last year, and current-year earnings are expected to exceed 5%.
- Financially healthy. Each company must have a Morningstar financial health rating of A or B.
- Not issuing shares to grow. The company must have a buyback yield equal to 0% or greater over the last year. This means the company is not issuing shares to finance growth, as issuing shares also dilutes shareholders.
From the stocks that made it through these filtering criteria, the top 10 were selected based on expected earnings growth as well as steadily increasing profits over the last several years. Companies that tend to be highly cyclical, such as commodity stocks, were not included.
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What Are Growth Stocks?
Growth stocks are public companies growing their profits, revenue or cash flow at rates well above their competitors and the market at large. Investors choose growth stocks to earn profits from the rapid price appreciation they promise.
Generally, growth stocks are smaller, newer companies disrupting their industry. They tend to offer unique services and products, and frequently develop novel technologies or intellectual property that put them ahead of their competitors.
By and large, growth companies reinvest their earnings and take on debt to expand rapidly. They are constantly ramping up production, acquiring other businesses and hiring lots of new employees to grow their businesses quickly.
What Is Growth Investing?
Growth investing is a strategy that involves identifying stocks to buy based on the long-term expansion potential of their underlying businesses.
Growth investors prioritize a company’s future potential over its current business metrics or fundamental market valuation. Growth investing is generally considered a more offensive investment style than value investing. Growth stocks have historically performed better during periods when interest rates are low or falling and corporate earnings are growing.
Growth investors are often willing to buy stocks with high P/E or P/S ratios based on the expectation that the companies will eventually grow into and beyond their current valuation. Growth stocks tend to be more volatile than the broader market, and investors often sell growth stocks during periods of uncertainty in the market.
Risks of Growth Investing
Because most growth stocks price in expectations for future growth, they tend to trade at high valuations relative to their current businesses.
If a growth stock’s price already factors in expectations for strong future growth numbers, even revenue growth that would otherwise impress Wall Street can disappoint growth stock investors and lead to a sell-off. If a growth stock shows signs of slowing or stagnating growth, growth investors can exit a stock all at once, triggering a steep decline.
Growth stocks are also particularly sensitive to rising interest rates. Discounted cash flow models are commonly used by fund managers who value future cash flows lower when the discounted interest rate is higher. In other words, the lower the discount rate, the higher future cash flows are valued today.
Growth vs. Value Stocks
Value stocks are public companies that investors and analysts believe are underpriced based on their current business metrics. Growth stocks are companies that investors believe will deliver better-than-average returns in the future.
Value stocks are typically considered low-risk, low-volatility investments, whereas growth stocks are higher-risk stocks with the potential for much larger upside over time.
Value stocks are considered to be undervalued at current market prices. Growth stocks may be overvalued based on current market prices but are expected to grow and exceed their current valuation.
Generally, value stocks feature attractive fundamental metrics, such as low price-to-earnings (P/E) and price-to-sales ratios (P/S). Growth stocks often have relatively high P/E and P/S ratios. Value stocks often have profitable businesses and pay relatively high dividend yields. Many growth stocks are unprofitable and pay no dividends.
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Growth Stock FAQs
How do you find growth stocks?
When screening for growth stocks, investors look at the following metrics:
• Revenue growth. Growth stocks should be seeing rapid expansion in sales. Consider both backward-looking reported sales growth in addition to forward-looking analyst expectations for future sales growth.
• Earnings growth. Like with revenue, growth stocks should be demonstrating strong profit growth.
• Share price gains. Rapid earnings and sales growth provide a strong foundation for stock performance that outpaces peers.
• Sustainable debt load. Growth companies with too much debt can run into trouble and run out of growth. High debt loads are not in and of themselves a bad thing, but a growth company needs to maintain a sustainable level of debt.
Most importantly, growth stocks are companies offering products or services that truly change how people live their lives.
How do you value growth stocks?
Investors use fundamental analysis and financial ratios to uncover a growth stock’s intrinsic value and compare it with the current market price. This can help them determine whether a growth stock is overvalued or undervalued.
Not all growth stocks are good deals. Overvalued growth stocks can decline in value until they reach a price that reflects their fundamentals—avoiding these growth stocks is key.
Why do growth stocks underperform when interest rates rise?
Rising interest rates make it more expensive for growth stocks to borrow money to fund their rapid sales and earnings expansion.
In addition, higher interest rates make future cash flows less valuable. That means that when interest rates rise, future earning growth becomes less valuable in today’s dollars because they must be discounted at a higher rate.
When will growth stocks recover?
The Federal Reserve is committed to raising interest rates until U.S. inflation begins to cool off. That’s bad news for growth stocks, which suffer in a rising rate environment.
Growth stocks may recover when the Fed has achieved its mission to tame inflation and ends rapid interest rate increases. But even then, higher rates could dampen the prospects of growth stocks for years to come.
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