The growth stock sector has performed variably across different industries. Technology, healthcare and consumer discretionary sectors continue to offer opportunities. In particular, these companies are leading in their fields or are positioned in high-growth areas like artificial intelligence (AI) and digital health.
Moreover, growth stocks typically thrive in environments of low interest rates and economic expansion. Yet, with current economic indicators pointing toward higher interest rates and a slowdown in growth, it’s crucial for investors to be selective.
For those looking to discover “hidden gems” on Wall Street, it might be prudent to look beyond the well-trodden paths. Consider smaller, less-known companies with unique value propositions or those in emerging sectors that have not yet been fully recognized by the market. The advantage of doing so is that one naturally sidesteps the sky-high valuations of many firms. Let’s explore seven of these hidden gems now.
Magnite (MGNI)
Magnite (NASDAQ:MGNI) is a leading independent sell-side advertising platform. The company offers a comprehensive suite of solutions that enable publishers to monetize their digital advertising inventory.
The company specializes in programmatic advertising, offering publishers and advertisers sophisticated tools to maximize revenue and reach target audiences efficiently. It’s addressing the issue of oversaturation in some types of advertising channels, especially online ones.
MGNI reported strong financial results for Q1 of 2024, with total revenue reaching $149.3 million, marking a 15% increase year-over-year (YOY). Despite a net loss of $17.8 million, Magnite improved its Adjusted EBITDA to $25 million with a 19% margin. Looking ahead, Magnite raised its guidance with a forecasted Adjusted EBITDA margin expansion of 100-150 basis points.
Also, Magnite’s strategically focuses on scaling its technology-driven advertising solutions, particularly in the burgeoning CTV sector. This has yielded impressive financial outcomes in Q1 of 2024. With revenue climbing to $149.3 million, a 15% rise YOY.
Ring Energy (REI)
Ring Energy (NYSEAMERICAN:REI) is an independent oil and gas exploration and production company. It focuses on acquiring, exploring, developing and operating oil and gas properties primarily located in Texas and New Mexico.
Importantly, the company’s operations are centered around the Permian Basin. This is a prolific oil-producing region in the southwestern U.S. known for its significant reserves and ongoing production.
I believe that REI is significantly undervalued from its current levels and that it will be a strong performer in the future.
Last quarter, REI reported quarterly earnings of 10 cents per share, falling short of the expected 14 cents per share. This marks a decline from earnings of 14 cents per share a year ago. The company posted revenues of $94.5 million for the quarter, exceeding expectations by 1.17%, compared to $88.08 million a year ago.
Despite beating revenue estimates three times in the last four quarters, REI’s earnings performance has been mixed. In fact, it surpassed EPS consensus only once over the past year.
Workday (WDAY)
Workday (NASDAQ:WDAY) is a prominent provider of enterprise cloud applications for finance and human resources. The company specializes in software-as-a-service (SaaS) solutions designed to help organizations manage their financials, human capital management, planning and analytics needs.
Last quarter, Workday reported revenues of $1.99 billion for the quarter, marking an 18.1% increase YOY. This met analysts’ expectations but fell short on billings estimates.
I like WDAY for a couple of reasons. The company’s PEG ratio of 2.26 indicates that its stock price growth is potentially undervalued relative to its expected earnings growth rate. Also, analysts have set an average price target of $282.48, significantly higher than its current trading price, suggesting potential upside.
In addition, Workday maintains a robust balance sheet with $7.18 billion in cash and equivalents, offsetting its $3.34 billion debt burden. All of this underscores that WDAY is potentially undervalued as well as underappreciated by Wall Street analysts and investors.
DraftKings (DKNG)
DraftKings (NASDAQ:DKNG) operates as a leading digital sports entertainment and gaming company, offering online sports betting, daily fantasy sports and iGaming platforms.
The company’s platform allows users to participate in daily fantasy sports contests across major professional sports leagues such as the NFL, NBA, MLB and NHL, among others. Additionally, DraftKings offers real-money sports betting in jurisdictions where it is legal. DKNG enables users to place bets on various sports events through its mobile and web-based platforms.
Sentiment is clearly on the side for bulls with DKNG stock. Over the past three months, 23 analysts have reviewed DraftKings, reflecting a generally bullish sentiment. Thirteen analysts rate it as bullish and nine as somewhat bullish. Notably, there were no bearish ratings reported. Analysts have set an average 12-month price target of $54.04 for DraftKings.
The stock has increased 50.91% over the past year, and I believe that momentum is on its side to keep rising much higher into the future.
PubMatic (PUBM)
PubMatic (NASDAQ:PUBM) is a company that operates in the digital advertising technology sector. It specializes in providing automation solutions for publishers to maximize revenue through programmatic advertising. This allows publishers to efficiently manage and optimize ad inventory across multiple channels and formats, including display, mobile, video and connected TV.
Beyond basic ad serving, PubMatic provides publishers with sophisticated monetization tools such as yield management algorithms and predictive analytics.
The company’s revenue has been steadily growing, reaching $278.31 million in the last 12 months, supported by a gross margin of 63.78%. Analysts have a bullish outlook on PubMatic. They forecast revenue growth and an average price target of $22.67, implying a potential upside of 15.37% from its current price.
Moreover, PubMatic’s strategic initiatives in enhancing its technology platform and expanding its market reach contribute to its competitive edge. With a forward price-to-earnings (P/E) ratio of 82.33 and a positive earnings growth outlook.
SelectQuote (SLQT)
SelectQuote (NYSE:SLQT) is a leading technology-enabled direct-to-consumer distribution platform that specializes in helping consumers shop for and compare insurance policies.
With revenues reaching $1.24 billion in the last fiscal year, forecasts indicate further growth to $1.56 billion next year. Thus, the company is poised to capitalize on increasing demand for insurance products. This is particularly true for segments like Medicare Advantage and life insurance.
Despite recent losses, SelectQuote has forward-looking metrics such as a low forward price-to-sales (P/S) ratio 0.32 and a positive average price target from analysts at $3. This represents a potential upside of 13.64%, meaning it has plenty of gas left in the tank to appeal to investors.
Further, SelectQuote is expected to achieve revenues of approximately $1.56 billion, marking an 18.51% increase from the previous year’s $1.31 billion. In terms of EPS, analysts forecast a narrowing of losses. For 2024, SelectQuote anticipates an EPS of negative 5 cents, a notable improvement from the negative 18 cents EPS reported for 2023. Looking further ahead, SelectQuote is positioned to sustain its revenue growth momentum, with estimates suggesting continued increases through 2026.
Remitly (RELY)
Remitly (NASDAQ:RELY) is a prominent player in the fintech sector, specifically focusing on digital remittance services. The company’s business model provides transparent exchange rates and low transfer fees, which appeal to its customer base.
I think there’s an excellent opportunity today for investors to consider RELY stock.
Remitly’s first-quarter revenue missed analysts’ estimates, primarily due to lower-than-expected active customer counts. The company noted that the first quarter tends to be less active in terms of customer engagement. Despite the revenue miss, Remitly managed to beat expectations on adjusted EBITDA and EPS. These provided some positive aspects in an otherwise mixed earnings report.
This was in May, but the stock still hasn’t fully recovered yet. I am bullish on RELY for the following reasons.
The average analyst price target of $24.22 suggests a potential upside of 103.70% from its current price. Also, analysts highlight the company’s strategic position in the digital financial services market and anticipate revenue growth of 23.09% over the next five years.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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