Growth stocks have the potential to outperform the market. These stocks often feature high year-over-year revenue growth, and some of them also generate profits. However, these same stocks can fall off dramatically if the market contracts. Investors saw this unfold in 2022 when many of the best-performing stocks of 2021 saw their valuations plummet by over 50%.
The ARK Innovation ETF (NYSEARCA:ARKK) is a good example of what happened in 2022. The top-performing fund shed most of its gains and has only been up by 5% over the past five years. This same fund had previously tripled within one year.
Some stocks combine high growth with resilience to endure economic challenges. These are some of the growth stocks to keep in mind.
Microsoft (MSFT)
The tech giant has led major market indices higher over many years. The stock is up by 57% year-to-date and has gained 266% over the past five years. Microsoft (NASDAQ:MSFT) gives investors exposure to cutting-edge technology and industries.
The company’s main growth engine is the cloud. Microsoft Azure continues to grow at a good rate while maintaining healthy profit margins. Which is not unusual, Microsoft routinely posts net margins above 30%.
Microsoft also makes money from its various office tools, video games and other resources. Having that many revenue streams gives the company more opportunities to reward long-term investors.
The company’s latest earnings report suggests the growth will continue. MSFT reported 13% year-over-year revenue growth and 27% year-over-year net income growth. Many investors have exposure to Microsoft stock through mutual funds, index funds, and exchange-traded funds. Portfolio managers often turn to this stock and it’s easy to see why.
Celsius (CELH)
Fresh off a recent stock split, Celsius (NASDAQ:CELH) continues to reward investors. The growth stock has a high valuation which currently sits at a forward P/E ratio of 56. However, the company is also growing rapidly as more people consume the sports beverage.
The sports drink company more than doubled its revenue and net income year-over-year. Celsius also beat analysts’ expectations by wide margins. The company reported an EPS of 89 cents while analysts were only anticipating 49 cents.
The company’s total current assets comfortably exceed total current liabilities. That means the company can continue to capitalize on growth initiatives while covering financial obligations.
Celsius continues to grow quickly which can make the valuation easier to justify in the future. The company has earned comparisons to Monster Beverage (NASDAQ:MNST) due to its strong demand and potential for long-term investors.
Celsius is in the early innings of its growth compared to Monster Beverage. Shares have surged by more than 4,000% over the past five years.
Perion (PERI)
Perion (NASDAQ:PERI) is a small-cap advertising company that helps businesses adapt to the shift to digital platforms. They make it easy for businesses to set up ad campaigns on search, social, display and CTV. The company uses artificial intelligence to optimize ad spend and generate higher returns for business owners.
Even with macroeconomic headwinds, the company grew its revenue by 17% year-over-year. Net income jumped by 28% year-over-year. Perion’s profit margin has been climbing in recent quarters and is closing in on 20%.
The advertising company only has a 12 P/E ratio which is much lower than that of its peers. The stock is up by 15% year-to-date and has gained almost 1,000% over the past five years. Perion’s all-time high is $42.75. The stock can realistically reach that level in 1-2 years if the company continues to deliver top-quality financials.
On this date of publication, Marc Guberti held long positions in MSFT, CELH, and PERI. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
