Growth Stocks Outperform the S&P 500: What Investors Should Know

2024 proved challenging for many stocks, yet a few managed to exceed the S&P 500’s impressive growth.

The S&P 500 experienced over a 20% gain for the second straight year. However, Archer Aviation (NYSE: ACHR), Pentair (NYSE: PNR), and Meta Platforms (NASDAQ: META) outperformed, offering investors noteworthy returns.

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Here’s why these three growth stocks remain solid investments for 2025.

Image source: Getty Images.

Archer Aviation: Set to Scale New Heights in 2025

Scott Levine (Archer Aviation): Archer Aviation’s stock soared nearly 59% in 2024, driven by positive analyst ratings and a new partnership in the Middle East. Some investors may feel it’s too late to invest after such remarkable growth, but key developments in 2025 could push stock prices even higher.

A landmark achievement in 2024 was the completion of Archer’s high-volume manufacturing facility in Georgia. Following this milestone, the market’s reaction could further elevate stock prices if the company successfully meets its production targets. Archer aims to begin aircraft production early in 2025, with a goal of reaching two aircraft per month by year-end, signaling progress towards revenue generation.

Moreover, Archer continues to explore growth avenues, from forging agreements with Anduril to expanding operational locations. While challenges exist for innovative companies like Archer, it holds promise for high-growth investors.

Pentair: A Solid Value Growth Opportunity

Lee Samaha (Pentair): Pentair operates in water technology, focusing on pool products and water systems. With a 38.4% return in 2024, it outpaced the S&P 500 index. Looking ahead to 2025, several factors suggest it can maintain this momentum.

Last year was tough for new pool constructions due to high interest rates, which affected spending. Pentair’s CEO, John Stauch, anticipates only 60,000 new pools in 2024, down from 72,000 in 2023. Should interest rates decrease, this trend may reverse, boosting new pool construction.

In addition, the existing pool base continues to grow, resulting in consistent spending—approximately 80% of pool segment revenue comes from current pool owners. Management is also implementing strategies to enhance profit margins, such as targeted pricing adjustments and improved supplier negotiations.

Wall Street expects mid-teens earnings growth for 2024 and 2025. Trading just over 20 times 2025 earnings, Pentair presents an appealing investment opportunity.

Meta Platforms: A Leader in AI-Driven Growth

Daniel Foelber (Meta Platforms): Meta Platforms surged an astonishing 386.5% from 2023 to late 2024, elevating its market cap to $1.48 trillion. Despite such impressive gains, the stock was initially undervalued, allowing for continued growth as the company invests heavily in research, development (R&D), and artificial intelligence (AI).

A significant portion of its revenue, around 27%, is allocated to R&D, which is unmatched by any other trillion-dollar company. Meta’s robust operating margins sit at 40%, and the company’s commitment to long-term projects indicates that current profits could be even more substantial.

META R&D to Revenue (TTM) data by YCharts

Through effective monetization of AI on platforms like Instagram, Meta is positioned well in the digital market landscape. Its primary competition, Alphabet’s YouTube, differs in function, providing Meta a unique advantage.

As Meta’s Reality Labs division develops ultra-long-term projects, ongoing alignment with AI developments—like those envisioned by Nvidia’s CEO—could yield impressive returns. With a P/E ratio of 29.1 and forward P/E of 24.3, Meta is still a sound investment, promising growth alongside its established revenue model.

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*Stock Advisor returns as of January 6, 2025

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, serves on The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, also holds a position on the board. Daniel Foelber, Lee Samaha, and Scott Levine do not have shares in the mentioned stocks. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla, and endorses Broadcom along with certain options on Microsoft. The Motley Fool adheres to a disclosure policy.

The views and opinions expressed herein belong to the author and do not necessarily reflect those of Nasdaq, Inc.