Many investors made it a point to avoid growth stocks after a disastrous 2022, but long-term investors were rewarded this year. And, even though many of the best growth stocks have taken off in recent months, investors can still find promising opportunities as the calendar flips to 2024. If you are shopping for growth stocks before the end of the year, you may want to consider these top picks.
Elf Beauty (ELF)
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One of the best growth stocks to consider is Elf Beauty (NYSE:ELF), a cosmetics company that offers vegan beauty products. Consumers can use Elf Beauty products for their eyes, lips, face, and skin without worrying about animal products.
For instance, some expensive beauty products use ambergris which comes from sperm whales. There are concerns about animals suffering in the process of creating beauty products. This concern does not apply to Elf Beauty products since it uses vegan ingredients.
It’s easy to see why some consumers intentionally avoid beauty products with animal ingredients. Elf Beauty’s rapid growth suggests this isn’t a small trend. Shares have gained 160% year-to-date and are up by 1,629% over the past five years.
The growth is justified based on impressive revenue and earnings. In the second quarter of fiscal 2024, Elf Beauty achieved 76% year-over-year revenue growth and raised its fiscal 2024 outlook. Net income almost tripled year-over-year and helped the company secure another quarter with a double-digit net profit margin.
Shares trade at a forward price-to-earnings (P/E) ratio of 47 and have a market cap a tad below $8 billion. The company’s enterprise value is lower than the market cap which is a good sign. Enterprise value is the sum of market cap and debt minus cash. A lower enterprise value means a company has more cash than debt.
Perion (PERI)
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Perion (NASDAQ:PERI) continues to trade at a reasonable valuation while delivering exceptional growth for investors. The stock is valued at 13x earnings with a $1.5 billion market cap.
The company delivered 17% year-over-year revenue growth in the third quarter and net income jumped by 28% year-over-year. The adtech company specializes in up-and-coming advertising platforms like Connect TV, search, and social.
Perion has been sitting on cash and enjoys a debt-free balance sheet. The company recently put some of its extra cash to work with a $100 million acquisition of Hivestack. The acquired company delivers digital out-of-home (DDOH) advertisements which are gaining popularity.
Hivestack works with top corporations to deliver ad placements. The synergy with Perion’s ad network can result in higher revenue growth from both businesses. Hivestack customers may opt to use Perion to bolster their visibility and vice-versa. Shares are up by 25% year-to-date and have gained more than 1,100% over the past five years.
Lam Research (LRCX)
The logo for Lam Research Corporation (LRCX) displayed on a white billboard
Lam Research (NASDAQ:LRCX) supplies wafer equipment that develops more effective semiconductor chips. Wafer technology is a core component of chip production, and Lam Research technology helps to develop almost every advanced chip.
Shares have gained 87% year-to-date and are up by 510% over the past five years. The stock trades at 26x earnings and offers a 1% dividend yield. Although revenue and earnings are down year-over-year due to some headwinds, the company generated 8.6% revenue growth quarter-over-quarter in the latest earnings report.
After mentioning the soft year impacting financials, Tim Archer, CEO of Lam Research, had a more optimistic note for long-term investors. “There are tremendous growth vectors ahead for Lam, and we are investing strategically to drive long-term outperformance,” he said.
Amazon (AMZN)
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Amazon (NASDAQ:AMZN) continues to deliver exceptional growth in e-commerce, cloud computing, advertising, and other business segments. The tech conglomerate has gained 74% year-to-date and is up by 117% over the past five years.
The company has rebounded after a disappointing 2022 and posted 13% year-over-year revenue growth in the third quarter. International segment sales are growing at a faster pace than North American segment sales. The international market is filled with opportunities and can help the company deliver exceptional growth in the long run. Net income came in at $9.9 billion.
Amazon’s recent decision to use eight distinct regions for fulfillment instead of one national fulfillment center has strengthened the value proposition of being an Amazon Prime member. The extra distribution facilities allow Amazon to ship goods to people’s doors much faster. Amazon is also experimenting with a custom AI chip called Amazon Bedrock and is using generative AI to strengthen Amazon Web Services.
Visa (V)
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Visa (NYSE:V) is the largest credit and debit card issuer and has a market cap of over $500 billion. The company has excellent profit margins along with revenue and earnings growth. The company grew its revenue by 11% year-over-year in the fourth quarter of fiscal 2023. Net income growth came in at 19% year-over-year.
Ryan McInerney, CEO of Visa, expressed confidence that Visa can continue to deliver for investors in the new fiscal year despite geopolitical and economic uncertainty. A commitment to buybacks can offshore some of the downward pressure if uncertainties grow. Leadership reinvested $4.1 billion into Visa stock in the 12 months ended Sept. 30. That reinvestment allowed the company to acquire 17.0 million shares of class A common stock.
Gen Digital (GEN)
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Cybersecurity stocks have generated a lot of buzz in recent months. Some cybersecurity stocks have more than doubled year-to-date but Gen Digital (NASDAQ:GEN) largely missed out on the rally.
Gen Digital is a cybersecurity software company that has popular products like Norton LifeLock and Avast. Lower revenue growth was a big reason the stock fell behind its peers in previous years. However, the company turned a corner in 2023 as it reported 33% year-over-year revenue growth in Q3 Fiscal 2023.
In the most recent quarter, Q2 of Fiscal 2024, the company reported 27% year-over-year revenue growth. Bookings grew by 28% year-over-year which indicates there is more in the pipeline for the company.
Other cybersecurity companies grow at faster rates, but none of them can compare to Gen Digital’s valuation. The company trades with a 10 P/E ratio and a 0.79 PEG ratio. Gen Digital even offers a 2.15% dividend yield but hasn’t raised it in a while.
The main weakness is that current liabilities are more than double the current assets. If the company strengthens its current ratio while maintaining revenue and earnings growth, it can become a promising pick for long-term investors.
Datadog (DDOG)
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Datadog (NASDAQ:DDOG) is a cloud infrastructure company that helps businesses stay on top of their cloud applications and implement cybersecurity best practices. It was also one of the many high-growth stocks that thrived during the pandemic but collapsed in 2022.
The roller coaster of returns still paints an impressive picture. The stock has gained 238% over the past five years and is up by 70% year-to-date. Datadog has always performed well with revenue growth, and the third quarter was no exception. The company reported 25% year-over-year revenue growth and now has 3,130 customers that pay the company at least $100,000 per year in recurring revenue.
However, more investors are accumulating Datadog shares due to the company’s recent switch to profitability. Datadog isn’t burning through cash each quarter anymore. The cloud infrastructure firm reported $22.6 million in net income which represents a 187% year-over-year jump. Significant profit growth can lead to a more attractive valuation and reward long-term investors.
On this date of publication, Marc Guberti held long positions in ELF, and PERI. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.
