Investors find themselves in a landscape transformed by persistent inflation and a banking sector crisis that has rattled most publicly traded firms. However, amidst the chaos, a group of resilient contenders has emerged, representing the top growth stocks to buy.
Tech stocks that took a major beating last year hint at a vibrant resurgence. Meanwhile, previously thriving sectors, including energy stocks and regional banks, are up against significant challenges. As whispers of recession and financial instability permeate the market, a strategic migration towards high potential growth stocks is in full swing.
Specters of speculative excess from the retail trading bonanza in 2021 still linger, but the market has evolved, carving a unique path. As investors, it’s essential to eye growth stocks with upside potential, but let’s not forget the ever-changing dynamics of the market. With that said, let’s look at seven of the best high potential growth stocks to wager on at this time.
Datadog (DDOG)
Datadog (NASDAQ:DDOG) commands a dominant position in the realm of cloud monitoring and security. Its robust platform has effectively simplified data surveillance and security, offering businesses a comprehensive solution.
Charting an impressive growth journey, Datadog’s revenue trajectory has been nothing short of extraordinary. What began as a modest $198 million in 2018 has catapulted to an astounding $1.7 billion in 2022. Year-over-year growth stands at a towering 50%, which dwarfs the sector median by more than 330%. Further sweetening the deal, forward revenue estimates suggest a promising 37% top-line growth.
As we look toward the horizon, analysts forecast acceleration in revenue growth for the next three years. Adding to this positive narrative, the firm is profitable non-GAAP, which makes it an incredibly attractive investment.
Unity Software (U)
Unity Software (NYSE:U) is a juggernaut in the graphics engine domain, boasting a more than 50% market share. Over time, it has transitioned from a pure-play game developer to an innovator in video architecture, animation, and eCommerce, adding new layers to its ever-evolving growth story.
Notably, its financial resilience is underscored by average revenue growth of roughly 40% over the past five years. Moreover, analysts estimate the firm to continue growing over 32% ahead. Additionally, its recent transition to profitability indicates that the business stands on solid ground.
The recent Apple Vision Pro announcement has sparked a renewed wave of optimism in the stock. In a significant development, Unity’s shares traded in the green following news that it will be developing the gaming ecosystem for Apple’s new augmented reality product. While the exact market potential for this venture remains a mystery, the partnership could unlock considerable upside for the graphics engine titan.
Snowflake (SNOW)
Leading cloud-based data platforms provider, Snowflake (NYSE:SNOW), has effectively ridden the wave of the tech stock rebound. With a 42% increase over the past 12 months, the company has been turning heads. The renewed optimism in the stock stems from the crucial connection between data and the burgeoning field of generative AI.
Last month, Snowflake reported its fiscal first-quarter results, surpassing analyst estimates on both revenue and earnings. However, the stock took a 16.5% hit the same day, as management’s sales guidance for the current quarter of between $620 million and $625 million fell shy of the analyst estimates by a fair margin.
Despite this short-term setback, analysts remain optimistic about Snowflake’s future, forecasting a forward annual revenue growth of 44% as the company inches toward profitability. Evidence of this potential is seen in the firm’s free cash flow from last quarter, which clocked in at nearly $300 million.
Qualcomm (QCOM)
Qualcomm (NASDAQ:QCOM) has become a top manufacturer of semiconductors, software, and related services. The firm’s rise to fame came through developing key patents for 3G and 4G technologies, a strategic move that has paid rich dividends for its shareholders over time. Furthermore, Qualcomm’s foray into designing its own chip ecosystems has yielded profitable outcomes. It attracts an impressive 9/10 profitability and growth rating from GuruFocus.
The company has set its sights on the promising realm of artificial intelligence. The firm’s AI chips have demonstrated superior performance, particularly in power efficiency tests, signaling a bright future. The firm’s SVP of Product Management, Ziad Asghar, hails the generative AI opportunity as just amazing for Qualcomm.
QCOM stock presents an enticing blend of growth potential and blue-chip features offering a robust dividend yield of over 2.5% while trading at under four times forward sales estimates.
Trimble (TRMB)
Trimble (NASDAQ:TRMB) has positioned itself as a versatile tech giant, offering robust tools for land surveying, route optimization for shipping and trucking, and even agricultural process enhancement. Its technological prowess has allowed it to gain traction among discerning investors. According to GuruFocus, the company’s 3-year revenue growth ranked better than 53% of its peers in its niche.
The stock became popular when it became part of maverick stock-picker Cathie Wood’s Ark Space Exploration & Innovation ETF (NYSEARCA:ARKX). This recognition catapulted Trimble into the spotlight. Though it may have fallen out of favor with investors of late, its transition towards a recurring revenue model and integrating big data and AI processes could supercharge its long-term positioning. Moreover, its profitability metrics are firmly in the green, marked by 12.3% and 15% growth in net income and free cash flow margins over the past five years.
Endava (DAVA)
Endava (NYSE:DAVA) has effectively carved a niche within the information technology outsourcing sphere. The firm offers specialized tech solutions to large enterprises on a contractual basis. Rather than embarking on the daunting task of building in-house teams for a myriad of tech requirements, companies can opt for Endava’s tailored solutions. With a balance of quality and cost-effectiveness, Endava is a go-to destination for companies seeking efficient tech solutions.
The company has been a growth juggernaut in its sector, delivering more than 32% revenue growth in the past five years. Moreover, it boasts a net income margin of roughly 9% over the same period. Additionally, its strong results have helped it build its massive cash flow base, which has grown from a modest 41 cents per share in 2014 to a whopping $2.31 per share last year. It continues to be in a hyper-growth mode while its stock trades at a 47% discount to its intrinsic value.
Dutch Bros (BROS)
With its innovative spin on the quintessential coffee shop idea, Dutch Bros (NYSE:BROS) continues to surge ahead of its competition. It is effectively capturing the affection of the Gen Z demographic with its agile locations and Instagram-worthy beverages. Its fresh approach and energetic clientele add a unique flavor to the competitive coffee market landscape.
The firm has been delivering solid growth numbers, marked by double-digit year-over-year revenue growth over the past several quarters. However, every success story encounters a few bumps in the road. Its recently released first-quarter results, while robust, fell slightly short of expectations. Though its revenues of $197.3 million in the first quarter represented a 30% YOY bump, it missed analyst estimates by a hefty $11.7 million. Nevertheless, such hiccups are commonplace for fledgling enterprises such as Dutch Bros racing toward their growth milestones. Adding a remarkable 45 new stores in the first quarter alone, the company forecasts around 30% revenue growth this year and the next.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines