Generally, uncovering the overlooked growth stocks that promise substantial growth can be like searching for a needle in a haystack. However, as the stock market approaches 2024, three compelling companies have managed to fly under the radar.
This article delves into the promising worlds of these three firms. Each hails from a different industry and shares a common goal: growth and adaptability. Let’s take a closer look at these overlooked growth stocks.
Frontline (FRO)
To begin our search for overlooked growth stocks, Frontline (NYSE:FRO) has secured a significant portion of its vessel days for future quarters at favorable rates. For example, 74% of its large crude carrier days have been booked at $53,200 per day for Q3 2023. Securing contracts in advance is a strategic advantage that provides revenue predictability and mitigates exposure to market fluctuations. Securing long-term contracts at favorable rates ensures a steady income stream, reduces revenue volatility and contributes to the company’s growth.
Looking at the order book, approximately 50 new LR2 tanker orders were placed in the first half of the year. This surge in orders raises the order book to nearly 20%. LR2 tankers have coated tanks, which degrade over time. Charterers are typically hesitant to book clean LR2 tankers beyond 15 years due to concerns about tank quality. Therefore, this suggests a strong demand for LR2 tankers and positions Frontline as a beneficiary of this demand.
Notably, Frontline estimates industry-leading cash breakeven rates of $22,700 fleet average. The estimate accounts for drydock costs for four specific Suezmax tankers scheduled for Q3 and four for Q4 2023. Cash breakeven rates are the foundation of a shipping company’s financial viability. These rates represent the minimum daily revenue required to cover operating expenses and debt obligations.
Overall, Frontline’s industry-leading cash breakeven rates indicate it can withstand economic downturns, adverse market conditions and rising operating costs. Thus, this resilience represents Frontline’s strength and positions it for rapid growth.
GigaCloud (GCT)
Focusing on operation, GigaCloud’s (NASDAQ:GCT) Q2 2023 GMV (gross merchandise volume) witnessed impressive growth, increasing by approximately 32% year-over-year. This underscores the company’s ability to attract sellers and buyers, resulting in an increase in traded goods volume.
Notably, the growth in the GMV attributed to 3P sellers increased by a remarkable 65% year-over-year, reaching $324.7 million. This component now constitutes around 53% of the total GMV. This shift toward 3P (third-party) sellers as a revenue source highlights the company’s ability to scale its business through organic growth.
The company recorded a significant, approximately 47% year-over-year increase in active 3P sellers. The addition of many 3P sellers reflects the attractiveness of GigaCloud’s supply-fulfilled retailing model. Similarly, the growth in active buyers by over 7% year-over-year is another key performance indicator. Favorably, the average spend per buyer increased by 24% year-over-year. Therefore, all the above highlights the company’s success in attracting high-quality, high-volume buyers, contributing to the platform’s growth and stability.
GigaCloud’s investment in marketing and advertising, mainly targeting brick-and-mortar furniture retailers, underscores the company’s strategic approach to expansion. The company’s aim is to tap into an underserved market and further extend its presence in this sector.
Lastly, GigaCloud’s transition from a foreign private issuer to following the same reporting and disclosure obligations as domestic companies (S-Form issuers) represents a significant step toward transparency and enhanced engagement with investors. This highlights GigaCloud’s focus on international capital markets starting in 2024, making it an ideal option in overlooked growth stocks.
Torm (TRMD)
A company’s ROIC is a critical indicator of its efficiency in utilizing capital to generate shareholder returns. Torm’s (NASDAQ:TRMD) ROIC had an impressive 33.9% in Q2 2023, excluding unrealized gains on financial instruments related to freight and bunker. This represents Torm’s ability to deploy capital to generate profits efficiently, a key driver of its growth potential.
Notably, Torm’s strategic approach to fleet management is pivotal to its growth strategy. Focusing on vessel acquisitions and disposals, during the quarter, there was the delivery of seven LR1 vessels acquired in January and three MR vessels acquired in March, as well as the sale and delivery of one LR1 vessel. It resulted in a fleet size of 87 vessels at the end of June 2023. Fundamentally, this indicates that Torm is actively expanding and optimizing its fleet. Effective fleet management not only enhances the company’s earning potential but also allows it to adapt to market dynamics and seize growth opportunities.
Furthermore, Torm collaborates with Seabulk to participate in the US Maritime Administration’s tanker security program. This highlights its ability to adapt to industry changes and leverage partnerships to enhance earnings. Specifically, the collaboration involves three MR vessels participating in the program. It is undergoing reflagging to the US while continuing its regular operations under Torm’s commercial management when not involved in the program. Therefore, Torm’s proactiveness in exploring new avenues for revenue generation and risk mitigation is important.
Finally, despite a 15% decrease in EU imports, Torm has capitalized on the 40% increase in EU import ton-mile during Q2. Hence, Torm’s ability to adapt to changing trade dynamics and seize growth opportunities, even when import levels are lower, is remarkable.
On the date of publication, Yiannis Zourmpanos 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.
