Growth stocks have the potential to outperform the stock market due to their growth opportunities. Many investors justify the high valuations of these investments by looking several years into the future.
Some growth stocks live up to their lofty valuations and provide generational returns for early investors. However, others fail to deliver and end up destroying shareholder value over time. Finding the right growth stocks requires a lot of effort, and some individuals may be better off with an index fund.
However, there is a middle ground. Some growth stocks have reasonable valuations and compelling growth prospects, making them attractive options for investors looking for undervalued opportunities.
Texas Roadhouse (TXRH) is a fast-food restaurant chain specializing in American steaks. The stock has seen significant growth, with a 38% increase year-to-date and a 213% gain over the past five years. With a 34 P/E ratio and a 1.39% yield, Texas Roadhouse continues to report solid financials that suggest the company can build on its successes.
Moody’s (MCO), a fintech firm, has outpaced the stock market with a 123% increase over the past five years and an 8% gain year-to-date. The company’s dividend growth rate and strong financial results in Q1 2024 highlight its growth potential.
Meta Platforms (META) is an undervalued growth stock trading at a 27 P/E ratio. With impressive financial growth and a focus on advertising, the company is poised for continued success. Wall Street analysts believe shares can reach new heights with an average price target suggesting a 12% upside.
SoFi (SOFI) has seen a turnaround in profitability, with a 13.8% net profit margin in Q1 2024. The company’s growth in multiple verticals and expanding member base make it a compelling long-term opportunity for investors.
American Express (AXP) offers growth at a reasonable price with solid financials and a dividend growth rate. Q1 2024 results show revenue and net income growth, indicating long-term opportunities for the company.
Alphabet (GOOG, GOOGL) trades at a reasonable valuation with strong momentum. The company’s impressive Q1 2024 results reflect revenue and net income growth, driven by its online advertising and cloud computing segments.
Nu Holdings (NU) is a Brazilian digital bank with high gross profit margins and strong revenue and net income growth in Q1 2024. Analysts believe there is more upside to the stock, making it a strong buy with a projected 13% upside potential.