Many of the top growth stocks are at attractive discounts after having a poor 2022. In fact, there are those who are providing what may be a once-in-a-lifetime chance. After peaking near 40, the S&P 500 has dropped to a price-earnings ratio of just around 19. As a result, many businesses are reporting higher-than-anticipated profits and are cutting costs by reducing staff and increasing productivity. As lessening inflation will free up more money for customers to spend on non-essential items, this is good news for businesses’ bottom lines. Hence, even in a recession, the market has minimal downside right now. So, the ten growth stocks below are excellent buys and won’t let you down over even for the next 10 years.
What Are Growth Stocks?
Growth stocks are shares of companies that have historically shown a higher rate of revenue growth in comparison to others in their industry. By and large, growth companies are startups or companies with a modest market capitalization.
Growth-oriented startups typically focus on developing and releasing cutting-edge products or technologies. The market rewards companies like these handsomely because they generate a lot of money and distribute it to their shareholders. The faster these businesses expand, the greater the potential rewards.
When looking at profitability ratios like price-to-earnings, price-to-sales, and cost-to-cash flow, high-growth stocks are typically more expensive than average stocks and more expensive than value stocks. For this reason, the high returns generated by growth stocks justify their higher purchase prices.
Growth stocks, like all other stocks in 2022, have been pummeled by the market in the first half of the year. Due to their reliance on consumer spending and low-interest rates, growth stocks are under increased scrutiny as inflation soars. A lack of space for inventory and a sluggish supply chain have also hindered the expansion prospects of growth stocks.
Growth stocks are currently trading at lower price ranges than they have been in quite some time, which is good news for long-term investors who are hoping that interest rates will eventually return to a low balance and boost the performance of the growth stock market.
What Is Growth Investing?
Stocks are chosen for investment in a growth portfolio based on expectations for the companies they represent over the long run.
Future potential is more important to growth investors than current firm indicators or fundamental valuation. When compared to value investing, growth investing is seen as more aggressive. When interest rates are low or dropping and corporate earnings are rising, growth stocks tend to do well even for the next 10 years.
Stocks trading at a high price relative to their revenues or sales may be purchased by growth investors who believe the firms will soon achieve growth equal to or greater than their current valuation. As a result, investors frequently unload their growth stock holdings when the market is uncertain, as these stocks tend to be more volatile in nature as a whole.
Risks of Growth Investing
As was previously mentioned, changes in interest rates can have a significant impact on growth stocks. Growth investors use their knowledge and expertise to assess the potential for growth in a growth stock, but they should be aware of the associated risks.
Growth stocks have a high price tag in the next 10 years because investors are betting on the company’s future success relative to its competitors.
High valuation, like any other aspect of the stock market, is not without its own set of dangers. Growth stocks can take a beating if the economy takes a sharp turn for the worse and interest rates rise, as they have this year.
Furthermore, growth stocks are subject to execution risk. A lot of startups with solid plans seem like sure bets at first, but if their product launch doesn’t go as smoothly as planned, the whole operation can take a nosedive. This could lead to a precipitous decline in their stock price, which would have repercussions for their investors.
When a company begins to expand, it takes on additional risk. There is often stress on a business as it attempts to expand. Growing businesses can be more challenging to oversee. The situation can get out of hand very fast when the number of employees increases from 10 to 500. A company’s success or failure depends on the quality of its management team and its ability to effectively carry out its day-to-day operations.
Best Growth Stocks for the Next 10 Years
We have compailed the best growth stocks for the next 10 years in this section of the article.
#1. Tesla
The rate at which Tesla is expanding justifies a higher price tag. The price-to-earnings ratio for Tesla at the time of this writing was 44.3x, up from a low of $113. Although things are looking up a bit, Tesla still has a ways to go. At its current price, the stock is a steal, especially considering its robust earnings.
The $1.19 in net income that the company reported exceeded analysts’ estimates of $1.13 per share by a wide margin. Thanks to skyrocketing consumer demand. The good news is that the company expects to increase vehicle production to around 1.8 million units this year, from 1.37 million units in 2017. Even CEO Elon Musk admitted that demand was far outstripping supply. Mizuho has a buy rating on the stock and a price target of $252, which is helpful.
#2. Fiverr
Yes, business has been slow since early 2021, but with the recovering freelance market, the company is poised for a major comeback. Fiverr’s ability to keep customers is also noteworthy. Fiverr’s business strategy is working, as evidenced by the fact that the company is able to attract and retain a large number of users who are subsequently spending more money on the platform, despite current losses.
Finally, Fiverr has rivals like Upwork (NASDAQ:UPWK), but they operate under a different business model. Freelancers can respond to your posting on Upwork, but Fiverr gives you access to a pool of experts right off the get. The second option is more persuasive and practical.
#3. Cloudflare
Cloudflare is a good example of a growth stock to watch in this sector because cybersecurity needs are expected to increase (NYSE:NET). Anyone in search of a means to improve the safety, speed, and dependability of their website will find the company’s offerings to be ideal. Websites rely on Cloudflare’s DDoS protection and the company’s CDN (Content Delivery Network) to ensure quick page loads, which is crucial for search engine optimization.
After the epidemic, I had previously held a negative outlook on NET stock. Yet the company’s reliability fascinates me, especially given that it has maintained year-over-year revenue growth of roughly 50% even when many other businesses suffered steep declines due to shifts in monetary policy. In addition, Cloudflare’s losses are decreasing, and once the company becomes profitable, I anticipate significant growth.
#4. Block
Block is a rapidly expanding IT firm offering a suite of game-changing products in the financial technology sector. The company’s stock price has been steadily rising as revenue has stabilized. In addition, both Block’s Cash App and Square are expanding rapidly as a result of their features. There has been a phenomenal increase in the adoption of these digital payment systems among both small and large enterprises in recent years. This shift toward more convenient and time-saving digital payment options can be attributed to the growing popularity of e-commerce among consumers and businesses alike.
Block’s platforms will continue to be an integral element of many companies’ operations as the world evolves towards a more digital future and the need for reliable and secure payment solutions increases. Since this is the case, the price premium on SQ stock is expected to significantly increase.
#5. Shopify
You could also think about investing in e-commerce firms because they are excellent growth stocks for the next 10 years. It’s true that Shopify is among the best (NYSE:SHOP). Quarterly revenues have increased, most recently by 21.6% in Q3, while quarterly losses have shrunk significantly. The sooner investors see the opportunity, the better, because the company has turned a corner. It’s safe to assume that the value of online retailers will increase dramatically in the years to come. The next decade is a great time to hold onto Shopify, as it is one of the oldest and most successful. There has been a consistent climb in SHOP stock for the previous few of weeks. In the event that its fourth-quarter profits once again stun Wall Street, the stock is expected to soar.
#6. Airbnb
Since its beginning in 2008, Airbnb has experienced explosive growth. Airbnb is a tempting investment opportunity due to its promising long-term growth and profitability prospects, despite some temporary setbacks. Although though the company has a presence in more than 200 countries and features millions of items, it still has room to grow and expand.
As an added bonus, the peer-to-peer business model the company uses results in a high customer lifetime value and a low client acquisition cost, making it a very desirable investment opportunity. This explains how Airbnb was able to maintain earnings when the post-pandemic boom ended. Most importantly, Airbnb is still growing at a healthy rate, posting 28.9% year-over-year revenue growth and 45.6% year-over-year net income increase despite its slower growth. A tremendous 42.1% net margin, up over 13% from Q3 2022, is the most crucial indicator. In the current market, a premium of substantially more money should be paid for a successful business with such margins.
#7. PayPal
In 2020, PayPal’s stock rose by nearly 256% from its low point to its high. PYPL stock, meanwhile, is down 35.3% from its pre-pandemic high due to selling pressure over the past two years.
The company has turned a corner and is currently surging, with top-line growth hovering around 10% and bottom-line growth nearly doubling year over year. It’s one of the oldest and best-known names in the financial technology industry everywhere. Because of this, PayPal stands to gain the most from the fintech industry’s projected $699.5 billion in value by 2023. Because of this, you should definitely capitalize on the present price.
#8. Global Payments Inc.
Possibilities for merchant acquirers arise as credit card firms expand. These businesses equip retailers with credit card processing hardware and software. The expansion of Visa and Mastercard has resulted in a corresponding expansion of the market for merchant acquirers. In specifically, Global Payments provides solutions to help its customers accept credit cards, debit cards, electronic checks, and digital wallet transactions. Solutions at the back end are also powered by it, including accounting for taxes, analytics, and security.
Throughout the previous decade, the company’s revenues have increased at a compounded annual rate of 16%. Since its 2021 high point, Global Connections shares have dropped by over half as the fintech space as a whole has been wiped out. Yet Global Payments kept expanding in 2022, and it anticipates even more double-digit earnings growth in 2023. Stocks trade at a multiple of 11 times expected future profits.
#9. Tradeweb Markets Inc.
Being a financial services provider, Tradeweb specializes in acting as a broker for its clients. In particular, the firm facilitates the exchange of various fixed-income and interest-rate securities via a bond trading platform. Trading in most financial items has gone digital for some time now. The interchangeability of stocks and other assets supports this conclusion. The listings of major corporations have a lot of liquidity, and each share of stock is equivalent to every other share.
Yet bonds are more difficult to understand because of their covenants and other unique features. To cut a long tale short, digital bond markets have developed at a far slower rate than traditional platforms. This is an opening that Tradeweb is seizing right now. Revenues increased from $563 million in 2017 to $1.19 billion in 2018. Additionally, it has done so while stealing market share from a major competitor, MarketAxess Holdings Inc. (MKTX). In 2017, Tradeweb’s stock price went down. Yet as long as interest rates are fluctuating, trade volume should increase, boosting Tradeweb’s bottom line.
#10. Lightspeed Commerce Inc.
Lightspeed Commerce operates a POS system in the cloud. They are used by shops for their checkout systems. Lightspeed also provides industry-specific options, such as those for the restaurant and hotel industries, in addition to its standard retail offerings. Lightspeed has greater room to develop than larger competitors like Block Inc. (SQ) and Shopify Inc. (SHOP). Lightspeed’s stock price skyrocketed in the early years of the pandemic as merchants hurried to embrace more complex checkout solutions.
Lightspeed increased their income from $57 million in 2017 to $548 millions for the fiscal year 2022. Going forward, revenue growth of about 25% annually is predicted by analysts. Meanwhile, we anticipate profitability for the business in 2024. Lightspeed has plummeted sufficiently from its all-time high price of over $125 per share to its current price of less than $16, representing a contrarian purchasing opportunity.
Conclusion
All of the aforementioned growth stocks for the next 10 years are those of large, established companies that have been around for a while but continue to show revenue growth. Mini versions of these trends can be seen in the expansion strategies of various startup companies. Keeping an eye on market trends and identifying which companies have a potential for rapid growth can help you decide which stocks to include in your investment portfolio.
FAQs
Is Microsoft a buy or sell?
The consensus analyst rating for Microsoft is Strong Buy. This is based on 29 Wall Street analysts’ ratings.
What is the most undervalued stock?
Hedge funds consider Exxon Mobil (NYSE:XOM) to be one of the best value stocks to buy right now.
Do growth stocks beat the market?
Due to their potential for growth, growth stocks are predicted to outperform the market over time.
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