Investing in the stock market can help individuals achieve their long-term financial goals sooner. While funds and blue-chip stocks can generate stable returns, some investors pursue growth stocks for greater potential.
When growth stocks get rolling, they can comfortably outperform the market and generate value for shareholders. Many growth stocks have frothy valuations that can get smoothed out over time if financial growth remains strong.
Many high-profile growth stocks captivate investors, but a few hidden gems growth stocks can perform well. Here are some to consider that may be new to you.
Sprout Social (SPT)
Sprout Social (NASDAQ:SPT) is a software that helps businesses harness social media to get in front of their target audiences. The firm has over 30,000 customers who pay monthly subscriptions that start at $249/mo.
While Sprout Social experienced a hiccup that saw a 5% year-over-year (YoY) decline in customers, the company has been generating more value from its customer base. The number of customers contributing over $10,000 in annual recurring revenue and over $50,000 in annual recurring revenue grew by 33% and 49% YoY, respectively.
Sprout Social anticipates Q4 revenue ranging from $90.5 to $90.6 million. The midpoint represents a 30% YoY growth rate compared to Q4 2022 revenue. Sprout Social also expects to be profitable from a non-GAAP perspective, but investors should put more weight on GAAP results.
Sprout Social stock fell flat over the past year but gained 256% over the past five years. Those gains indicate the stock can generate a lot of momentum quickly when it becomes profitable.
Wingstop (WING)
Wingstop (NASDAQ:WING) is a rapidly growing throwback restaurant that sells chicken wings. The company uses aviation themes from the 1930s and 1940s in its restaurant designs and has been in business since 1997.
The equity has delighted long-term investors and is up by 80% over the past year. Shares have gained 353% over the past five years. The stock is quite volatile and has a 106-forward P/E ratio. Investors who intend on holding the stock for multiple years can experience solid gains.
Wingstop operates over 2,000 stores and experienced 26.5% YoY revenue growth in the fiscal third quarter of 2023. Same-store sales are increasing at a fast rate, and digital sales have soared by 66.9% YoY. Net income jumped by 46% YoY.
Wingstop had a 16.7% net profit margin in that quarter and still has plenty of market share to gain. The stock only has a $9 billion market cap. The stock has a low 0.29% dividend yield but tends to distribute a meaningful special dividend every other year. The company also has an impressive dividend growth rate. Last year’s dividend growth rate was 15.8%.
Fortinet (FTNT)
Fortinet (NASDAQ:FTNT) is a cybersecurity leader that has been in business for over 20 years. The company’s software and services help companies stay secure from cyberattacks.
Cyberattacks are on the rise due to artificial intelligence, the lucrative nature of the industry, and other factors. A single cyberattack can cost a company millions of dollars. These attacks can even wipe out small businesses.
Fortinet has been slower in recent quarters. The equity is only up by 25% over the past year but has an impressive 5-year gain of 317%. A rebound in billings growth during Q4 2023 can lead to reinvigorated revenue growth in subsequent quarters.
Revenue growth in the quarter came in at 10.3% YoY. Net income attributable to the firm came in at $392.0 million. It marks a 12.1% year-over-year increase and further strengthens the company’s net profit margins.
Fortinet shares trade at a 41-forward P/E ratio, which is more reasonable than that of most cybersecurity stocks. Investors with a long-term horizon may generate solid returns from this pick.
On the date of publication, Marc Guberti 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.
