If you’re searching for growth stocks to buy, look no further. If you’ve followed my recent articles, you’d know that I am in favor of value stocks leading into the new year. Nevertheless, an optimal investment portfolio must be blended, which is why I decided to discuss growth stocks for a change.
Although growth stocks are somewhat homogenous, there are various sub-divisions of growth. For example, some growth stocks are secular, while others are cyclical with value aspects attached to them. Therefore, it is essential to be clear about your grouping of growth stocks as an analyst or investor.
For this particular analysis, I screened for secular growth stocks suitable for long-term investors. The companies mentioned in the article possess wide market shares in niche industries. Moreover, each forms part of industries with above-average growth potential.
Let’s discuss my growth stocks to buy in detail.
Growth Stocks to Buy: Booking Holdings (BKNG)
Booking Holdings (NASDAQ:BKNG) is perfectly placed to benefit from the secular growth embedded in the online travel industry. Moreover, Booking Holdings’ market share of 58.3% means it holds significant pricing power, which explains its substantial operating profit margin of 42.3%.
Booking Holdings is the parent company of entities such as Bookings.com, Priceline, Kayak, Rentalcars.com, and Cheapflights, to name a few. The sheer diversity of Bookings Holdings’ brands stands out as it allows the firm to achieve vertical integration, thereby decreasing its cost base and achieving cross-sales.
The online travel industry has low barriers to entry. However, Booking Holdings looks set to dominate for years as its early-to-market achievement, paired with a growth-by-acquisition strategy, adds substance to its growth outlook.
Booking Holdings’ third-quarter earnings report echoed its embedded growth. For example, the company achieved net income of $2.5 billion, a 51% year-over-year (YOY) increase. Furthermore, a refined overview shows that Booking Holdings experienced significant momentum from room nights booked and general travel bookings, which surged by 15% and 39.1%, respectively. Such momentum will likely resume throughout Booking Holdings’ next business cycle amid the growing reach of the company’s end market.
BKNG stock has a price-to-growth ratio of 0.76x. The ratio speaks volumes, showing the stock is undervalued with stellar growth prospects baked in.
Fiverr International (FVRR)
Fiverr (NYSE:FVRR) ripped through its earnings estimates last month, leading to its stock skyrocketing by roughly 15% ever since. Despite its promising month-over-month performance, FVRR stock is down YOY. As such, I think it is investable, given that an assumed fundamental inflection point emerged with its third-quarter earnings beat.
The global freelance market is set to grow at an annualized rate of 15.1%, which is impressive, to say the least. Moreover, Fiverr holds a market share of 14.26%, illustrating its competitive zeal. Therefore, I believe the firm is aligned to sustain its three-year CAGR of 29.34% throughout the remainder of this decade.
As previously mentioned, Fiverr topped its third-quarter earnings estimates. The company beat its revenue target by $1.41 million and its bottom-line target by nine cents. Salient to Fiverr’s recent success has been its spend-per-buyer, which notched up by 4% YOY. Consider that the spending rate increased during a period of economic turbulence, which illustrates the resilience of Fiverr’s business model.
Fiverr’s aforementioned growth rates convey a secular growth trend. Additionally, key valuation metrics show that FVRR’s stock is undervalued. For example, FVRR’s price-to-sales ratio of 2.98x is 78% below its cyclical average.
I’m definitely bullish here!
Wix.com (WIX)
Mean reversion is a dominant feature in the financial markets. However, the trend can be your friend on certain occasions. WIX (NASDAQ:WIX) stock is up by roughly 50% YOY, and its relative strength index is at 81.69. Although a pullback scenario is a noteworthy risk, I’m willing to bet on trend growth; here’s why.
A couple of catalysts have emerged for WIX stock. Firstly, Bank of America (NYSE:BAC) recently reinstated its WIX buy rating on the premise of accelerated growth and new product rollouts. In addition, Wix won court approval for a $300 million stock buyback endeavor earlier this month. The stock buyback program will likely reduce the cost basis for Wix’s existing investors and raise its overall per-share value.
Furthermore, Wix has long-term benefactors. The company is set to benefit from an annualized industrry growth rate of 7.1% until 2030. Moreover, Wix is firmly grounded in the affordable drag-and-drop website market, which presents it with a broader end market than most other website builders.
Lastly, WIX stock looks good from a valuation perspective. For example, WIX stock’s price-to-sales ratio of 4.48x is at a 5-year discount of 47%. Although some might argue that WIX stock is overbought, I think robust fundamentals paired with cyclical value will result in the stock sustaining its recent performance.
On the date of publication, Steve Booyens 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.
