The stock market has been on a tear in the past month, with the S&P500 up over 9%. Considering the market’s annual average return to be around 10%, this is quite tremendous growth. As investors, we are always looking for ways to beat the market though. This is why growth stocks have such a high appeal, especially in recent years when sectors such as technology have widely outperformed the market.
However, not all growth stocks are technology-related, and they often come from other sectors as well. The key thing in common, though, is massive earnings growth potential. Although they provide much more risk, these stocks have much greater potential than the average value stock or a broad market index. In this article, we’ll take a look at three growth stocks that you should keep an eye on, as they could explode in the coming years.
Daqo New Energy Corporation (DQ)
Daqo New Energy Corporation (NYSE:DQ) is a leading global polysilicon producer in the global solar photovoltaic industry. The company is currently trading at $27.81, with Yahoo Finance analysts projecting a one-year price range of $19.66 -$87.00, with an average of $42.43.
Daqo New Energy, or Daqo, recently became debtless in late 2022, using its earnings from the third quarter to pay off all of its debts. Daqo has been focusing on using renewable energy sources for its production process, removing its reliance on limited natural resources for manufacturing. Its efficiency has massively increased due to the lack of need for coal.
Daqo has a P/E ratio of 3.15 times, far below the sector median of 25.50 times. Additionally, its revenue is expected to grow by 8.99% per year. Daqo has a compounded average EPS growth rate of 41.95% compared to the sector’s 8.88% for the past five years. I highly recommend this stock due to its lack of debt and a high potential for explosive growth.
Enact Holdings Inc (ACT)
Enact Holdings Inc (NASDAQ:ACT) is a leading financial services company that specializes in providing mortgage insurance and holding services to mortgage lenders and investors.
Growth-wise, Enact Holdings’s revenue YoY growth rate has increased to its current value of 3.97%, a phenomenal ~172% increase from its 5-year average of 1.46%. Along with that, its EPS managed to recover from the small hit from COVID-19, increasing from $2.27 in 2020 back to $4.17 TTM, a solid 84% recovery displaying the company’s resilience.
Of course, to sustain this growth, Enact Holding also has high profitability margins to boast. Looking at its gross profit margin, we see that ACT’s gross profit margin TTM of 78.41% stands at a stable and decent growth from its 5Y average of 73.34%.
While there are some concerns about declining ROE and increasing tensions from rising interest rates, the company’s strong undervaluation and optimistic price targets maintain ACT as a great addition to round out any portfolio needing a growth pick.
S&P Global Inc (SPGI)
S&P Global Inc (NYSE:SPGI) is a leading provider of transparent and independent financial ratings, benchmarks, analytics, and data to markets worldwide. Yahoo Finance analysts estimate it will trade within a one-year price range of $400 – $475, averaging at around $442.65.
Looking at its growth, S&P Global’s revenue YoY growth rate stands at its current value of 18.87%, a notable ~35% increase from its 5-year average of 14.02%. Additionally, its YoY EBITDA growth of 9.92% places itself at a 37% increase to the sector median of 7.24%, pushing S&P Global up the ranks as the company grows ahead of its competition.
Profitability-wise, S&P Global’s TTM gross profit margin of 66.37% is ~10% higher than the sector median of 60.37%. Especially with how strong its recent Q3 earnings were, I have confidence in its ability to outbeat its sector in a sustainable and efficient way. With positive outlooks in this company’s rating segment, l believe this company will be able to remain strong despite the current extended macroeconomic sales cycles and maintain its strong presence as a growing company in the financial sector.
On the date of publication, Ian Hartana and Vayun Chugh 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.
