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Many investors seek growth stocks for the promise of higher returns. Beyond funds and well-established blue-chip stocks, such stocks can deliver substantial gains and create wealth for shareholders. While growth stocks can be high-flying, some little-known gems carry the potential for impressive growth. Here are three such stocks that may have escaped your radar.
Sprout Social (SPT)
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Sprout Social (NASDAQ:SPT) offers software solutions to businesses, enabling them to leverage social media for engaging their target audiences. With monthly subscriptions starting at $249, the company has amassed over 30,000 customers.
Despite a brief stumble that resulted in a 5% year-over-year customer decline, Sprout Social has effectively increased the value derived from its customer base. The number of customers contributing over $10,000 and $50,000 in annual recurring revenue saw a substantial 33% and 49% year-over-year growth, respectively.
Anticipating Q4 revenue in the range of $90.5 to $90.6 million, Sprout Social expects a 30% year-over-year growth rate compared to the prior year. Furthermore, the company anticipates profitability from a non-GAAP standpoint. However, investors should weigh GAAP results more heavily.
Although Sprout Social’s stock has seen little movement in the past year, a 256% climb over five years hints at its potential to gain substantial momentum upon becoming profitable.
Wingstop (WING)
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Wingstop (NASDAQ:WING) is a rapidly growing restaurant chain specializing in chicken wings. The company’s unique aviation-themed restaurants, dating back to 1930s and 1940s aesthetics, have been a hit since its establishment in 1997.
The stock has delighted long-term investors, with an 80% rise over the past year and a staggering 353% climb over five years. Though quite volatile with a 106-forward P/E ratio, investors with a multi-year horizon stand to reap significant rewards.
With over 2,000 operational outlets, Wingstop witnessed a robust 26.5% revenue growth in the third quarter of fiscal year 2023. Same-store sales are on a rapid upward trajectory, and digital sales surged by 66.9% year-over-year. Net income soared by 46% year-over-year.
Despite a modest 16.7% net profit margin in that quarter, Wingstop has substantial market share yet to capture. With a market cap of only $9 billion, the stock offers a low 0.29% dividend yield but periodically issues significant special dividends and boasts an impressive dividend growth rate. Last year’s dividend growth rate was 15.8%.
Fortinet (FTNT)
Fortinet’s Cybersecurity Solutions Defend End-Users from Cyberattacks
The Growing Threat of Cyberattacks
In a world where digital threats wreak havoc on a daily basis, a company like Fortinet (NASDAQ:FTNT), with over two decades in the cybersecurity industry, plays protector to businesses inundated with cyber perils. The proliferation of artificial intelligence has only exacerbated the relentless pursuit of digital vulnerabilities. The lucrative rewards for cybercriminals also contribute to the perilous threat that companies face.
A Shifting Landscape
While Fortinet has experienced a slowdown in recent quarters, the equity has only managed to muster a 25% increase over the past year. Nonetheless, a more impressive 5-year gain of 317% underscores the company’s steadfastness in the face of market fluctuations. The positive momentum in billings growth during Q4 2023 signals the potential for a resurgence in revenue growth across subsequent quarters.
Financial Performance and Market Position
In the latest quarter, Fortinet reported a 10.3% year-over-year increase in revenue growth while net income attributable to the firm surged by 12.1%. This robust performance not only fortifies the company’s financial muscle but also contributes to its bolstered net profit margins. Trading at a 41-forward P/E ratio, Fortinet stands poised as a more reasonable investment option among the cybersecurity stocks. This market positioning suggests that investors with a long-term outlook may be well-positioned to reap solid returns from their investment in the company.
Insights from a Finance Freelance Writer
Marc Guberti, a finance freelance writer at InvestorPlace.com, suggests that the potential for solid returns from Fortinet warrants a closer examination. As the host of the Breakthrough Success Podcast, Guberti’s insights carry weight in the financial world. His contributions to esteemed publications including U.S. News & World Report, Benzinga, and Joy Wallet, further underscore the credibility of his assessment of Fortinet’s potential.
The Verdict
As the digital landscape and cyber threats continue to evolve, Fortinet stands steadfast as a frontline defender against malevolent cyber forces, making it a compelling investment prospect for those who value long-term financial resilience in the face of insidious digital threats.
