If there’s anything I’ve learned from years of covering the market, it’s that Wall Street loves growth stocks. Fast-growing companies tend to attract investor attention and deliver stellar returns relative to value stocks. However, the real Wall Street darlings are companies that can deliver both high growth and solid profits. These rare companies have pricing power, expand margins over time, and eventually start returning excess capital to shareholders, sending their stocks soaring.
In my experience, some of the best opportunities come from under-the-radar growth stocks that are expanding rapidly, yet remain unknown to mainstream investors. With the right fundamentals, these growth stocks can deliver outsized returns and recover quickly during market downturns as they march steadily toward consistent profitability. Let’s take a look at three such growth stocks!
Cematrix (CTXXF)
Cematrix (OTCMKTS:CTXXF) is a Canadian company focused on manufacturing and supplying cellular concrete products in North America. These products serve as lightweight backfill for walls, insulation material for oil and gas infrastructure, and grout for various construction purposes. The enterprise can benefit substantially from the construction boom in North America.
Although still a small Canadian firm, I believe the company’s upside potential warrants more attention. In fact, CTXXF stock has already been rebounding nicely, up 88% over the past year, but still 59% below its 2021 peak. A stock price of 24 cents per share still appears attractive to me. The company attained profitability in Q3, with revenue surging 76% to CAD$20.4 million. I anticipate revenue to potentially double over the coming two years, alongside considerable margin expansion.
Cematrix recently publicized a new CFO and $6.7 million in new contracts this month, which could drive substantial growth ahead. With the right execution and strategy, I foresee this cement company becoming a major player in the North American construction materials industry.
SmartRent (SMRT)
SmartRent (NYSE:SMRT) is a smart home automation company. It is becoming popular with landlords and homeowners with smart homes. I believe substantial upside potential lies ahead, as the stock trades sideways after declining in late 2021. Rents and housing prices continue rising alongside income, which will only drive more revenue and net income for the company over the long-run. Indeed, the company’s financials already appear poised for a turnaround. Revenue grew 49% year-over-year to $60.3 million, as profitability quickly comes into focus.
Analysts anticipate profits in 2025 accompanied by revenue expanding around 15%-20% annually moving forward. Revenue is expected to surge from $273 million in 2024 to $536 million in 2028. The company also possesses $215 million in cash against virtually no debt, providing funds to fuel substantial growth ahead. Moreover, the premium investors pay for exposure to this growth stock seems quite reasonable, at only 2-times forward sales, while software stocks typically trade at much steeper premiums. If SmartRent manages to surpass its earnings targets going forward, I expect SMRT stock to be one of the best-performing growth stocks in this current cycle.
DLocal (DLO)
DLocal (NASDAQ:DLO) is an Uruguayan financial technology firm specializing in cross-border payments. The company’s platform links global merchants to emerging markets, enabling receipt of payments from customers and making payments to customers in these regions.
This is another stock that’s basically moved sideways over the past year and a half after an initial decline following the post-COVID boom cool-down. My bull case is that substantial growth lies ahead for this fintech stock, which boasts some of the most robust margins in the market – a 23% net margin, exceeding 93% of software industry peers. Its 3-year revenue growth rate sits at 82%, better than 97% of peers. This growth is due to the company’s foothold in many fast-growing developing markets.
Moreover, analysts anticipate the company’s earnings per share will double from 2024 to 2026, as revenue surges from $886 million to $1.52 billion over the same period. Paying just 24-times forward earnings for this growth seems like a steal. DLocal also carries virtually no debt, while holding $639 million of cash on its balance sheet. If execution remains solid, I expect substantial upside for long-term investors.
Freee KK (FREKF)
Freee KK (OTCMKTS:FREKF) is a developer of cloud-based software, including Cloud Accounting, Cloud HR Labor, and Cloud ERP products. This Japanese company has been expanding rapidly in recent quarters, and I believe ample growth remains. The 3-year annual revenue growth rate sits around 30%, and forward 3-5-year annual revenue growth should linger around the same pace.
The major issue is profitability. Freee KK reported a -67.4% net margin in Q4, which is quite concerning. However, the company possesses $219 million in cash against only $23 million in debt, sufficient to handle more than two years of losses if they remain constant, which is unlikely. I expect losses to begin falling as the company’s top line expands.
Also of note, while Japan has exited its negative interest rate policy, rates are still super low, and any cash crunch could easily be supplemented with leverage thanks to the company’s minuscule debt burden. This allows more debt intake going forward, so I view FREKF stock as a promising cloud play for the long-run. Gurufocus estimates the stock’s fair price at $43.40 in mid-2025, providing major upside from the current $23 per share price tag, if achieved.
D2L (DTLIF)
D2L (OTCMKTS:DTLIF) is a global learning innovation firm aiming to reshape education and work by pioneering personalized learning and expanding access to high-quality education regardless of age, ability, or location. Millions worldwide use the company’s core technology, including the Brightspace LMS.
The stock has been extremely volatile since going public two years ago. However, recent momentum seems promising. Over the past year, DTLIF stock is up around 44%, and I believe it can continue cruising higher. Online learning continues to grow even without pandemic tailwinds, with many still opting to learn remotely.
The company recently posted 11% year-over-year revenue growth alongside shrinking losses, which declined from $97.7 million in 2022 to $18.4 million in 2023. That’s impressive progress. I think D2L can quickly expand margins and continue double-digit top-line growth. Analysts agree, expecting the company’s revenue to hit $452 million in FY2032. With substantial room for margin growth, I see plenty of upside potential if execution remains solid. Notably, D2L also holds $123 million in cash against only $12.6 million in debt.
Inter & Co. (INTR)
As I have articulated numerous times, the economic downturn stemming from interest rate hikes has not been isolated to just banks. It has also detrimentally impacted fintech firms and enterprises relying on the banking industry for growth. However, this narrative does not apply universally.
Brazil is one nation that commenced its rate hike cycle early and has subdued inflation, now entering a rate reduction period. This has been advantageous for the country’s fintech and banking sectors, with many Brazil-based fintech companies thriving. One relatively unknown name is Inter & Co. (NASDAQ:INTR), which has gained 265% over the past year. I believe substantial upside remains in the years ahead, as its stellar performance is likely to continue.
Inter & Co. is the holding company of Grupo Inter, operating the premier Super App in the Americas. The company offers banking capabilities, investments, credit, insurance, and cross-border solutions.
Revenue is anticipated to continue expanding at a double-digit pace in the forthcoming years. Additionally, robust earnings per share growth of 43% is expected in 2025 and 26% in 2026. Paying merely 15-times forward earnings for such growth still appears to be an attractive proposition. Analysts see Inter & Co. delivering $1.24 billion in revenue in 2024 coupled with 40 cents in earnings per share.
Network-1 Technologies (NTIP)
Network-1 Technologies (NYSEMKT:NTIP) specializes in intellectual property development and monetization. The company collaborates with patent holders to assist in licensing their innovations. Significantly, the company’s ‘930 patent (6,218,930) plays a crucial role in the industry-standard Power over Ethernet (PoE) technology.
This stock has not been as fortunate as the others on the list. That may be partly due to the fact that Network-1 is one of the more boring stocks when you zoom out. This stock has traded between $2 and $5 per share since 2017, and lingered near the lower end of that band for much of its history.
However, what entices me about this stock is that the small firm still furnishes a dividend with a 4.8% yield, likely because of its impressive 25.4% net income margin. It has negligible debt and $45 million in cash. If the enterprise can utilize its substantial patent portfolio moving forward and leverage it to accelerate growth, I believe substantial upside lies ahead. It is also trading near its $2 floor. So, I view the stock’s downside risk as relatively minimal.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More: Penny Stocks — How to Profit Without Getting Scammed
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.
