Insider Monkey
13 Most Promising Growth Stocks According to Analysts
Ramish Cheema
9 min read

In This Article:

In this piece, we will take a look at the 13 most promising growth stocks according to analysts. If you want to skip our coverage of the latest stock market news, then you can take a look at the 5 Most Promising Growth Stocks According to Analysts.

The primary reason most folks are attracted to the stock market is growth. If bets are timed right, then investment can double or even triple in value over a short period of time depending on the market conditions. This phenomenon is so integral to the stock market that we don't even have to look too far back in its history to see its illustration. This is because 2023 has been the year of artificial intelligence when it comes to stocks. San Francisco, California based OpenAI took the world by storm this year when it first introduced ChatGPT - the world's first chat bot based on generative AI - and then followed up GPT-4, one of the most advanced A.I. models on the planet.

This created a feverish stock buying frenzy that saw investors flock to A.I. companies to profit from their shares. One of the biggest beneficiaries of the rush to A.I. was the Santa Clara, California based semiconductor designer NVIDIA Corporation (NASDAQ:NVDA). NVIDIA designs graphics processing units (GPUs), chips that are essential to training and operating advanced A.I. models. So how does NVIDIA tie into our narrative of the stock market being one of the biggest deliverers of investment growth? Well, NVIDIA's potential to dominate the global A.I. conversation has led its shares to gain a whopping 249% year to date. What this means is that if you have invested $1,000 into its shares at the start of this year, then your investment would be worth $3,490 right now, leaving you with more than three times what you had in January.

While NVIDIA is one of the biggest growth stories of this year, as a whole, investors have some tools up their sleeves when it comes to classifying growth stocks. One of these is the price to earnings (P/E) ratio. A P/E ratio evaluates the premium that investors are willing to pay for a firm's shares over its earnings. Generally, the higher the P/E ratio is w.r.t the industry multiple, the stronger the 'growth sentiment' about a company is. This is because investors are 'pricing in' future earnings growth through the share price by paying a higher price now with the hope that earnings will increase in the future.

However, growth is not an absolute principle for the stock market. The market's ability to deliver principal growth is quite dependent on the broader economic environment. Once again, since 2022 and 2023 have been some of the most historic years for the market, we don't have to look too far back to see how this works. 2022 was marked by record high inflation fueled by the Russian invasion of Ukraine and the low interest rates during the pandemic era. To bring inflation down, the Federal Reserve aggressively jacked up interest rates, which isn't great for either the market or growth stocks. Higher interest rates mean that money flows into high rate securities since they are essentially risk free. This made the stock market lose, and for growth stocks, this was compounded by inflation. Inflation isn't great for growth stocks, and not only for their market performance. Higher inflation means firms can not comfortably invest in the future, the demand for their products drops, and they have to tighten their belts to maintain stability.

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