The potential for lower interest rates creates a good setup for growth stocks. These stocks tend to outperform the market when borrowing costs get cheaper. Corporations that are considered growth stocks also tend to report robust revenue and earnings growth.
These companies may have many opportunities to gain market share and increase the average value per customer. Investors can benefit from diversifying their portfolios and filling them with several growth stocks. Some growth stocks are better than others, and if you are looking for new ideas, you may want to consider these top picks.
ServiceNow (NOW)
ServiceNow (NYSE:NOW) is a cloud computing company that helps businesses increase their productivity while reducing risk. The platform lets clients create workflows to stay on top of tasks and online security.
NOW has a service that works very well based on its 98% renewal rate. The company has over 7,700 customers which include 85% of the Fortune 500.
ServiceNow recently reported third-quarter earnings that exceeded expectations and prompted management to raise its guidance for the year. Revenue grew by 25% year over year (YOY). The company’s 83 additional transactions of customers paying over $1 million per year contributed to overall growth. Net income more than tripled YOY.
Surging net income is making the valuation more attractive, but it still has a lofty value compared to other growth stocks. Shares currently trade at a 55-forward P/E ratio. Investors who can wait a few years can ignore the present valuation concerns as long as the company continues to report high net income growth.
Lululemon (LULU)
Lululemon (NASDAQ:LULU) continues to reward investors who many athletic brands have been losing market share or maintaining their current positions. The company posted 19% YOY revenue growth in its Q3 report. Also, the board announced the authorization of a $1 billion stock buyback.
LULU has been a hit across many age groups and is generating international appeal. While revenue from North American customers only increased by 12% YOY, international revenue soared by 49% YOY. Lululemon stands to achieve higher revenue growth rates in the future as it penetrates into global markets.
The company now has 686 stores after opening an additional 14 stores in the third quarter. LULU is aiming for 13%-14% YOY revenue growth as well as $12.5 billion in net revenue in 2026.
This milestone requires an average of $3.125 billion in revenue each quarter. It represents a 42% revenue increase from the most recent quarter. So, it’s realistic for the company to achieve this goal in 2026 or the year before and reward long-term shareholders in the process.
Gen Digital (GEN)
Gen Digital (NASDAQ:GEN) is a cybersecurity stock that hasn’t received as much love as other cybersecurity firms in the market. Although GEN stock is up by 150% over the past five years, it has gained a far less impressive 7% year to date (YTD).
A low valuation and reputable cybersecurity software and services make the stock prime for a rally. Shares only trade at a 10 P/E ratio despite posting 27% YOY revenue growth in the most recent quarter. Bookings grew by 28% YOY which indicates high revenue growth will likely continue.
Also, Gen Digital has increased its average value per customer from $6.98 to $7.28. The company isn’t likely to outperform other high-flying cybersecurity stocks. However, its valuation and growth opportunities make it a “growth at a reasonable price” investment.
GEN is aiming for fiscal 2024 revenue to fall between $3.81 to $3.835 billion. The $3.8225 midpoint represents 14.5% YOY revenue growth. Growth investors seeking a home run stock may want to look elsewhere. However, if economic uncertainties hit the markets, Gen Digital isn’t likely to lose as much value as richly valued stocks.
On this date of publication, Marc Guberti held a long position in NOW. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
