In this piece, we will take a look at the ten best revenue growth stocks to buy. If you want to skip over the latest news for the stock market and want to jump ahead to the top five stocks in this list, then take a look at 5 Best Revenue Growth Stocks to Buy.
As the first week of July came to an end, investors were dealt with a pleasant surprise by the Labor Department. Market sentiment was booming by the end of 2023's first half, as major indexes defied the doom and gloom at the start of this year and ended up posting some of the best gains in decades. Taking a well deserved break, investors decided to rest as July Fourth came, but they were dealt with a fresh bout of uncertainty as private payrolls data shattered optimism for the Federal Reserve's interest rate hike.
This data showed that private sector employment had grown by 497,000, which was more than twice the initial expectation. Early reactions to the data showed how jittery the market has become to the labor market, as stocks tumbled and volatility jumped. However, later in the day, saner voices called for caution as they pointed out that this set of data, compiled by the ADP, has undergone a change in collection methodology and that investors should look to the Labor Department's jobs data for June due next day for more clarity.
And what a data set this was. The June jobs report showed that the U.S. economy added 209,000 jobs in May, marking the first time in months that the jobs data ended up undershooting market expectations. The figure marked the lowest number of jobs added in more than two years, and it was the first time in more than a year that it actually came in lower than what the market was betting on. However, and as the stock market bears would love to point out, the number of jobs added is not the only component of a labor market report. Another key figure in it is the unemployment rate. And this rate stood at 3.6%, a hairline drop from May's 3.7%.
A crucial detail in the jobs report was the one about part time employment. This data point can perhaps indicate why the private sector report diverged significantly from the latest data reading since it shows that part time workers jumped by a whopping 452,000 in June to sit at 4.2 million. The Labor Department ascribes this jump to slowing economic conditions, as people signed up for part time roles to compensate for fewer working hours. As a whole, the 209,000 figure is below the six month average of 278,000 this year, and government, health care, and social work jobs were the largest contributors. Another key point for the stock market bears is the wage data for June. The Labor Department reports that average hourly wages in the U.S. stood at $33.58 in June, after growing by 0.4% over May. Higher wages also tend to be inflationary as they provide consumers with greater purchasing power and more money to spend.
In short, digesting the data release requires balancing multiple points and then looking at the crystal ball to gauge a sense of what the Fed might do. On the former front, The Goldman Sachs Group, Inc. (NYSE:GS)'s chief economist Jan Hatzius summed things up nicely after the release, when he shared his thoughts in an interview on CNBC. The entirety of his comments is worth reading to make sense of what is perhaps the most important macroeconomic data point for the stock market.
According to him:
I think it's slowing gradually, as far as employment growth is concerned. Slowed a little bit more than expected, but that's the trend. However, still with an unemployment rate that is very close to the sort of three and a half percent level that we've seen well over a year at this point. So, this report to me seems very consistent with the soft landing in the labor market.
As to how long it generally takes for high interest rates to translate into economic activity, he shared:
Well I think the lag between rate hikes or monetary policy tightening and the maximum impact on economic growth isn't that long. By our estimates, frankly, this is consistent with the academic evidence that we've looked at, it's only about two quarters, two to three quarters maybe. But I think the biggest drag from the very rapid 75 basis points per meeting moves of 2022, the biggest drag's behind us. And you can see it very clearly in the housing market. I mean housing in the second half of last year subtracted almost one and a half percentage points from real GDP growth. But now housing is clearly stabilizing and there's a discussion about whether you know we see a rebound. That will, we'll need to see whether that actually materialized but we're certainly not seeing the sort of declines, and the sort of drag on growth that we had late last year.
So, why are these details important for a piece that covers best growth stocks to invest in? Well, both corporate and consumer purchasing powers drop in an inflationary environment that we are seeing today. However, firms that have consistently grown their revenue for years are playing in growing markets and are aided by the strong fundamentals to capture what is called a total addressable market (TAM). Therefore, as the economic conditions improve and inflationary pressures drop, these fundamentals as indicated by prior revenue growth can aid in future sales growth as well. This growth can translate into stock market performance as well, particularly when the shares have been hit due to inflation affecting the revenue.
As evidence of how fast this turnaround can be, the biggest example is of Meta Platforms, Inc. (NASDAQ:META). The firm's three year annualized revenue growth rate is 18.15%; however, its shares tanked by a stunning 64% last year. Yet, it has rebounded by 149% year to date this year and is almost at similar share price levels in December 2021. Another example is the electric vehicle manufacturer Tesla, Inc. (NASDAQ:TSLA). Its three year annualized revenue growth rate is 49.10% and the shares had tanked by 65% on the stock market last year. This year though, Tesla's shares have gained nearly 152%, but are still quite far from the levels they had stood at in December 2021.
With these details in mind, let's take a look at some great revenue growth stocks to buy, out of which the top picks are Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE), Axonics, Inc. (NASDAQ:AXNX), and Shockwave Medical, Inc. (NASDAQ:SWAV).
10 Best Revenue Growth Stocks to Buy
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Our Methodology
To compile our list of the best revenue growth stocks to buy, we first narrowed down the top fifty stocks that have grown their revenue by more than 30% over the past five years on average. A five year average growth rate is used so that firms with sporadic growth that might be due to short lived macroeconomic trends or asset sales are eliminated to only include those companies that have grown revenue organically and consistently. The final list of firms was ranked by the number of hedge fund investors as of Q1 2023. While hedge funds invest in all kinds of stocks, ranking stocks by the number of investors is crucial since it differentiates the companies based on what smart money is thinking. All revenue growth figures are taken from Morningstar Financial. The final list of the top revenue growth stocks to buy is as follows.
fuboTV Inc. (NYSE:FUBO) is an entertainment company that provides a live streaming platform for different kinds of content coverage. It has consistently grown its revenue for the past three years and has a five year growth rate of 655%. Out of its past four quarters, fuboTV Inc. (NYSE:FUBO) has beaten EPS estimates in two quarters.
14 of the 943 hedge funds had bought fuboTV Inc. (NYSE:FUBO)'s shares during Q1 2023 according to Insider Monkey's research. The firm's biggest shareholder among these is Paul Marshall and Ian Wace's Marshall Wace LLP since it owns 7.2 million shares that are worth $8.7 million.
fuboTV Inc. (NYSE:FUBO) joins Axonics, Inc. (NASDAQ:AXNX), Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE), and Shockwave Medical, Inc. (NASDAQ:SWAV) in our list of best revenue growth stocks to buy.
Selecta Biosciences, Inc. (NASDAQ:SELB) is a rare company that uses nanoparticles to develop treatments that aid the immune system in fighting disease. It has a five year average revenue growth rate of 251% and has grown the sales for each of the five years.
Insider Monkey's first quarter of 2023 survey of 943 hedge funds revealed that 17 had owned a stake in the company. Doron Breen and Mori Arkin's Sphera Global Healthcare Fund is Selecta Biosciences, Inc. (NASDAQ:SELB)'s biggest investor, through an investment worth $3.2 billion.
Riot Platforms, Inc. (NASDAQ:RIOT) is a Bitcoin mining company that also makes and sells power equipment. Its revenue has grown by nearly 295% on average over the past five years. However, it has missed analyst estimates for earnings per share for the past four quarters.
By the end of 2023's March quarter, 17 out of the 943 hedge funds part of Insider Monkey's database had bought Riot Platforms, Inc. (NASDAQ:RIOT)'s shares. Out of these, the firm's largest shareholder is Paul Marshall and Ian Wace's Marshall Wace LLP with a $20 million stake.
Revance Therapeutics, Inc. (NASDAQ:RVNC) is a biotechnology company that is developing a treatment for muscular contraction. It has an average five year revenue growth rate of 247%, and its shares have an average recommendation rating of Buy.
Insider Monkey took a look at 943 hedge funds for their Q1 2023 shareholdings to discover that 20 had invested in the firm. Revance Therapeutics, Inc. (NASDAQ:RVNC)'s biggest hedge fund investor is William Leland Edwards's Palo Alto Investors, owning 5.2 million shares that are worth $169 million.
Dynavax Technologies Corporation (NASDAQ:DVAX) is a pharmaceutical company that makes and sells hepatitis vaccines. Its five year average revenue growth rate stood at a whopping 366% by 2022 end, more than three times the 2021 figure.
As of this year's first quarter, 22 of the 943 hedge funds portfolios part of Insider Monkey's research had held a stake in Dynavax Technologies Corporation (NASDAQ:DVAX). David Kroin's Deep Track Capital is the firm's largest shareholder, owning a $62 million investment.
Ultragenyx Pharmaceutical Inc. (NASDAQ:RARE), Dynavax Technologies Corporation (NASDAQ:DVAX), Axonics, Inc. (NASDAQ:AXNX), and Shockwave Medical, Inc. (NASDAQ:SWAV) are some top revenue growth stocks that hedge funds are buying.
