Millionaire-maker growth stocks have seen significant appreciation this year. However, for many growth stocks, their stock prices don’t reflect the new “bull market,” and remain depressed. Suppose we exclude the FAANGs and look at the bigger picture. In that case, you can invest in two types of growth stocks: momentum stocks like Nvidia (NASDAQ:NVDA), which runs purely on hype and analyst speculations instead of financials. Or, you could look into growth stocks that remain in an undervalued range after the selloffs in the last two years. There aren’t many that are in the middle.
For the first option, I find it too risky right now. The economy is yet to digest all the rate hikes, and I would not say a recession is out of the question yet. But, of course, that’s not something anyone can predict. But what I can say with almost certainty is that this AI rally is unsustainable and will soon fall on its face. As I’ve argued multiple times before, analysts are ignoring the competition many AI companies face, and much speculation is being baked into their sales projections.
Thus, the second option is much more compelling. Buying into depressed companies exposes you to growth and substantial upside potential with very little downside risk if things go wrong. There are many millionaire-maker growth stocks that fall into this category. Let’s look at seven of those.
Millionaire-Maker Growth Stocks: International Seaways (INSW)
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An American company “providing energy transportation services for crude oil and petroleum products in International Flag markets,” International Seaways (NYSE:INSW) has seen explosive financial growth in the last two years. Especially after Russia invaded Ukraine. As Europe nullifies its Russian energy imports, this company has been a key beneficiary of this process. Europe now relies heavily on tankers to satisfy its energy needs, and this company operates a fleet of 75 very profitable vessels.
That’s very well reflected in the company’s financials, with a net margin of 54% and year-over-year revenue growth exceeding 186% in the latest quarter. However, the share price hasn’t kept pace, and the stock trades at a forward earnings multiple of just 4 times. Yes, growth is expected to decline in the long run, but all the possible cons seem priced at this valuation. Many also think that this company’s future depends on the Ukraine-Russia war and will tumble once it ends. That’s not true at all. Even if the war were to end today, the NATO countries would not be willing to lift their sanctions on Russia. Thus, this is a clear buy in my eyes.
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Crown Castle (NYSE:CCI) specializes in wireless communication infrastructure, such as cell towers. This should immediately bring Verizon (NYSE:VZ) and AT&T (NYSE:T) into your mind, and indeed, this is a very similar company. The stock price has also been similar recently, but the financials here are very different.
Even though it is not a new company, it is still in its growth phase. Looking at its long-term stock price trend makes that quite evident. The company has retained positive top-line growth for almost a decade straight if you discount the one quarter of negative growth amidst the pandemic. It grew sales by 7.7% YOY in Q1, and profits also expanded by 8%. These metrics should imply healthy stock price appreciation, but the reality is different.
Since the start of 2022, CCI stock has been down almost 47%. That’s even more than VZ, which is declining. I believe this opens up a great opportunity to snap up the stock, considering it also has a 5.6% dividend yield to sweeten the deal. These dividends have been increasing for eight years consecutively.
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Smartsheet (NYSE:SMAR) is a cloud-based platform that enables teams to collaborate, manage, and automate work processes. The company has grown rapidly in recent years, driven by the increased demand for digital transformation and remote work solutions. However, bears have been worried about the company’s competition and slowing growth. That’s true, but the sharp correction through last year has taken SMAR to bargain levels, and snapping up the stock is a good idea.
As for the growth, analysts still expect a healthy 20% top-line growth YOY through 2026. Profit growth is also expected to be robust, with EPS tripling from FY24 to FY26. I expect even higher growth, considering the company’s earlier disappointments have caused low expectations among analysts. It beat EPS estimates and revenue estimates by 137.98% and 2.7%, respectively, in the latest quarter. All things considered, I expect a solid upside here.
Estee Lauder (EL)
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Estee Lauder (NYSE:EL) is a cosmetics company that many may notice has been sliding out of the growth category. Wall Street has punished the business for the red ink, and it now sits almost 52% below its peak. Not only that, the current share price is even lower than what it was in Q4 2019.
I believe there’s a great opportunity here since the business is expected to continue delivering double-digit sales growth after an 11% decline this year. Even better, EPS is expected to more than double in the next two years from $3.35 to $6.71. These metrics should cause the stock to bounce back sharply from the current trough, and analysts’ price targets imply a 30% gain on average. That’s excellent, considering the current market conditions.
Zoom (ZM)
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If you haven’t heard of Zoom (NASDAQ:ZM), you could be living under a rock. This platform became a household name during the pandemic era with very explosive growth. However, the magic died down just as quickly, and it now sits a quarter below its pre-pandemic high in Aug. 2019. RingCentral (NYSE:RNG) might also ring a bell for savvy investors, as these companies have interlinked growth stories. I’m bullish on both, but I consider ZM a superior buy, even though it has lower growth for now.
The company has meager liabilities with a liquidity buffer of $5.6 billion, and all the cons here are now priced in. It has also been trading sideways for more than a year and a half. Thus, I only see it going up from here.
Furthermore, I would point out that video conferencing and remote work haven’t died down with the pandemic. If anything, this has only accelerated the trend towards remote work, and these trends will slowly materialize over a multi-year period. Analysts realize this and see Zoom’s sales growth slowly creeping higher in the years ahead. YOY sales growth is expected to be 5.6% in FY2026 from 2% in FY2024.
Luminar Technologies (LAZR)
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Luminar Technologies (NASDAQ:LAZR) is among the stocks I have been the most bullish on, but it is not without controversy. The company is in the LiDAR sector, and the future of it is hotly contested and debated. Simply put, LiDAR offers much better technology for self-driving cars but at a higher cost. Many car manufacturers have started to adopt this technology, but many also think that it is too expensive to succeed.
I disagree that LiDAR cannot succeed. That’s because it is still in its early stages, and the technology is slowly being refined to be much more inexpensive. It now costs a fraction of what you’d pay just five years ago, and industry experts believe the costs will fall even further. I believe costs will go down enough for it to be adopted en masse for self-driving vehicles, and since Luminar Technology is in the driving seat here, I am very bullish on it. Even better, LAZR stock is sitting at a depressed level already, down 81% from its peak and over a year of sideways action.
The focus on profits has also contributed to the stock’s depression, but cash is not a factor here. This company is unlikely to run into a cash crunch with such high sales growth and guides over $300 in cash by year-end and a positive gross margin. Analysts believe the company will end 2023 with 112% YOY sales growth, which will climb to a blistering 207% next year. A strong buy!
M3 Inc (MTHRY)
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M3 (OTCMKTS:MTHRY) is a Japanese healthcare company that provides services to the life science industry. It offers a wide range of solutions, including interactive marketing, education, content, hiring, and research. M3’s goal is to use the internet to help people live longer and healthier lives and to reduce unnecessary medical costs. To say that the company is under the radar would be an understatement, and little research about it is available in English. Thankfully, it does have ADRs, and you can buy this bargain without hassle before it bounces back up from its current trough.
This company has no debt and a net margin of 21.24%, better than 94% of its healthcare peers, and modest sales growth going forward. The valuation is the most compelling, trading almost 80% below its 2021 peak. Gurufocus notes it as significantly undervalued with a fair price tag of $35 by 2026, 250% higher than its current price.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Omor Ibne Ehsan is a writer at InvestorPlace. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as cryptocurrencies and penny stocks. TipRanks has consistently ranked him among the top 5% of experts as of August 2023. You can follow him on LinkedIn.
