After a rocky 2022, there are finally signs that growth stocks are rebounding in 2023. While many investors got burned last year when high-flying tech names crashed, now could be the perfect time to look at promising, overlooked growth stocks with upside potential.
The stock market could rebound with the easing of interest rates and economic normalization. The stars seem to align for robust returns, especially for investors who target high-risk, high-reward stocks that flew under the radar during broader sell-offs.
While these overlooked names spent months languishing in oversold territory, their fundamental long-term growth stories haven’t changed. These stocks could quickly post outsized gains once Mr. Market notices their discounted valuations and future profit potential. Let’s consider at the following seven.
Seadrill (SDRL)
Seadrill (NYSE:SDRL) is an offshore drilling contractor that seems poised for massive gains. After Russia’s invasion of Ukraine upended global oil dynamics, demand for drilling has skyrocketed. And with countries rushing to ramp up production to ensure energy security, Seadrill sits in the catbird seat.
Already, the company’s financial performance validates this rosy view. In its latest quarter, Seadrill grew revenue, a whopping 58% year-over-year to $395 million. Even more impressive was the $49 million in net income, putting net margins at a fat 23% – one of the highest in the industry.
Yet strangely, Mr. Market has largely ignored this drilling standout. Sure, Seadrill isn’t a household name. But analysts expect head-turning growth ahead, with EPS potentially leaping from $3.70 this year to $6.15 by 2025. Oh, and sales should rise 45% this year, too.
With production set to scale dramatically across resource-rich regions, I believe Seadrill can deliver even stronger numbers.
The company owns one of the most advanced fleets around. And as more complex wells get drilled worldwide, drillers with cutting-edge capabilities seem destined for a gusher. Seadrill has everything – exceptional finances, leading margins, a versatile fleet, and benefits from high oil demand. This overlooked driller could easily offer multi-bagger gains for patient investors.
Smartsheet (SMAR)
Smartsheet (NYSE:SMAR) is a SaaS collaboration platform that helps enterprises better manage workflows. And while volatility whipsawed its share price last year, SMAR looks poised for massive mean-reversion ahead.
Quietly, Smartsheet has continued executing its hyper-growth strategy regardless of macro conditions. Despite losses, scaling now will yield significant future dividends. Already, we see glimpses of this potential.
Analysts forecast SMAR tripling revenue from FY 2024 to 2031, with profit quintupling over that span. Historically, Smartsheet has trounced estimates, so I view those figures as conservative.
Lending confidence, SMAR shares have been steadily recovering since last summer’s carnage. And bullish momentum seems to be accelerating, with the stock poised to break out.
As collaborators worldwide turn to its intuitive platform, I expect blowout earnings ahead that catch Wall Street off guard. So while losses can grate on investors, remember Smartsheet is sacrificing short-term profit for disruptive long-term gains.
This overlooked SaaS play checks all the right boxes and looks geared up for significant upside.
Opera (OPRA)
Opera (NASDAQ:OPRA) is a Norwegian browser company that appears to be making a turnaround. After trading around $17 last spring, I turned bearish on this one, as it looked too expensive. But with shares near $13 now, the risk/reward looks far more compelling. Quietly Opera has been executing well lately, with multiple catalysts that could spark a rebound.
Opera GX gaming browser has a cult following among young gamers, an invaluable cohort for Opera’s next-generation platform. The company dominates browsers in emerging markets, giving it exposure to immense growth runways. And financially, Opera is flashing green shoots of a recovery.
Last quarter revenue grew over 20% to $103 million, while net income jumped 79% to $17 million. Cash flow trends also look constructive.
As Opera continues gaining share through its disruptive ad-supported model and lean platform, don’t be surprised if this rebound story runs toward its $25 high.
UiPath (PATH)
UiPath (NASDAQ:PATH) is an AI and automation software company that seems unfairly overlooked. UiPath trades at a reasonable level given its bright prospects, unlike over-hyped AI pure-plays sporting nosebleed valuations.
Make no mistake, though, this robotics disruptor is far from boring. With automation in high demand amid widespread labor shortages, UiPath sits at the nexus of multiple secular growth trends.
Already, the company is hitting its stride operationally. Analysts forecast UiPath will nearly double its EPS by 2028, with 15-20%+ sales growth annually. Yet even those upbeat projections understate PATH’s potential.
This AI trailblazer seems poised for hyper growth as more workflows get automated globally. And with robots still in the early innings of mainstream enterprise adoption, UiPath has a long runway ahead as secular tailwinds gather momentum.
Mr Cooper Group (COOP)
Mr Cooper Group (NASDAQ:COOP) looks intriguing here. Despite surging over 370% since 2020, shares still seem undervalued, trading at just 10X earnings.
Cooper’s tremendous profitability is powering the bull case – the company boasted a 48% net margin last quarter.
Operationally, Cooper continues humming along, with earnings trouncing estimates by 57% recently and sales beating estimates by 28%. Looking ahead, analysts expect robust bottom-line growth even if mortgage volumes cool somewhat.
Sure, housing outlooks remain hotly debated as rates and prices moderate. Yet Cooper’s diversified business should prove resilient even in challenging environments. With best-in-class margins EPS growth, this overlooked mortgage stock has a lot of juice left.
Sprinklr (CXM)
Sprinklr (NYSE:CXM) is an enterprise customer experience platform that looks oversold after “cautious” guidance.
No doubt CXM’s 30% plunge since the last earnings was an overreaction. Despite the outlook, CXM still beat Q3 EPS estimates by 60% on 3.3% higher revenue, and over the previous years, it has outperformed Wall Street’s expectations by triple-digit percentage points on average.
CXM turned profitable only three quarters ago and is still scaling. With double-digit revenue growth expected ahead amid strong secular tailwinds, this remains an exciting hyper-growth story.
Management is clearly taking a conservative approach, given uncertain macro conditions. But once sentiment improves, don’t be surprised if this overlooked customer experience disruptor bounces back quickly.
Cadre Holdings (CDRE)
Cadre Holdings (NYSE:CDRE) is a niche safety and survivability equipment manufacturer thriving amid increased global tensions. The world is becoming increasingly unstable geopolitically. Demand for law enforcement gear expected to grow due to activism and conflicts.
And CDRE sits perfectly to capitalize on these themes. Catering to defense, public safety, and law enforcement agencies worldwide, Cadre provides must-have equipment that should continue seeing robust budget allocation.
Already, shares have surged nearly 60% since its trough in June as momentum accelerates. And with a 1% dividend yield to boot, this overlooked safety equipment manufacturer has substantial upside potential ahead.
On the date of publication, Omor Ibne Ehsan 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.
