Interested in building generational wealth? Stock investments traditionally perform better than gold, bonds, real estate, and even cryptocurrency. But if you invest in high potential growth stocks, you better fasten your seatbelt. They can take you on an emotional roller coaster ride.
Between November 2021 and December 2022, the growth oriented Nasdaq Composite index lost 35% of its value. Year to date, however, it has regained 34% of what it lost. That means it still sits well below where it sat 20 months ago. It also indicates there are bargains waiting to be picked up.
Growth stock investing isn’t for the faint of heart. It requires savvy investors willing to seek out undervalued growth stocks and hold on until the breakout occurs. The following three companies are some of the top growth stocks to buy today.
Alphabet (GOOG)(GOOGL)
The owner of dominant search tool Google and video sharing site YouTube remains poised for superior gains in the years to come. Alphabet‘s (NASDAQ:GOOG)(NASDAQ:GOOGL) search engine sucks the oxygen out of the search market room with a 92.6% share, according to data from GlobalStats. Its YouTube platform has 2.6 billion active users, second only to Google itself and Facebook.
Both give Alphabet enormous reach and income through advertising. Combined, they provided over $50 billion in revenue in the second quarter, a 5% increase from last year. Yet the real opportunity lies elsewhere.
Google Cloud services, for example, continues to rack up growth. It nearly doubled its market share between 2017 and 2022, going from 6% to 11%. Cloud generated $8 billion in revenue last quarter, up a whopping 28% year over year. With enterprise cloud spending still in its early innings, the platform could readily challenge Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) for supremacy.
Analysts expect Alphabet to continue to grow earnings at a better than 15% compounded annual rate for the next five years. Even with the stock up 46% in 2023, there’s plenty more room to run.
Axon Enterprise (AXON)
Shares of stun gun and body camera maker Axon Enterprise (NASDAQ:AXON) are down 20% from recent highs. The maker of the Taser energy weapon reported lower than expected first quarter growth in future contract revenue. Even though Axon booked a record $4.8 billion in the period, that was only 3% higher than it had in last year’s fourth quarter. The stock selloff represents an opportunity for investors.
Axon is a smartly growing company. Its less than lethal weaponry is an essential tool for law enforcement looking to deescalate tense situations. Axon’s body cameras are also a high demand product for the protection of police officers and the public. Axon rounds all this out with an evidence database system that is fully integrated into both platforms.
Axon’s components are sticky. Once a department becomes enmeshed in one of the platforms, it is difficult to extricate itself to go to a competitor. It is also building profitability. Axon Enterprise reported its fifth consecutive quarter of GAAP profits. With revenue surging 34% in the first quarter, analysts are looking for 34% annual growth in profits.
Axon doesn’t look cheap by traditional metrics of price-to-earnings or price-to-sales, but it has rarely traded at so-called normal levels. Look for the stun gun and body cam maker to continue to grow into its valuation.
Trupanion (TRUP)
Pet insurance specialist Trupanion (NASDAQ:TRUP) is the third growth stock ready to explode. As the humanization of pets continues, the need for pet insurance grows.
The American Pet Products Association says consumers spent $138.6 billion on pet care last year. Insurance is an area that is just beginning to grow extensively. GrandView Research deems it a $9.4 billion industry that’s set to grow 17% annually through 2030.
Trupanion is the dominant player in the space with about 30% of the market. The next closest competitor is Nationwide Mutual Insurance with a 19% share. And even though Trupanion derives most of its revenue from the U.S. and Canada, it actually has greater penetration rates in the U.K. and Europe. North American penetration rates run around 2%. It’s at 5.6% in Europe and 11.2% in Australia.
That provides for explosive expansion going forward. This is a category still in its infancy but one that will grow by leaps and bounds in the future.
On the date of publication, Rich Duprey did not hold (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.
