The stock market continues to demonstrate strong performance, with the Dow Jones recently achieving a new record high above 40,000 points. Several factors contributed to this upward movement, including better-than-expected quarterly earnings from major banks.
Positive momentum has generated numerous high-flying stocks from which to choose. Recent inflation data also suggests the Federal Reserve may enact three interest rate cuts later in the year, which could further support gains in the equities market.
For investors looking to capitalize on potential price increases, selecting which growth stocks to buy presents a challenge. Stocks that have experienced significant growth could be overvalued and prone to decline.
It is prudent to consider high-flying stocks with growth proportional to their valuation increases, an indicator that management has not outstripped fundamentals. Companies addressing large target markets or industries anticipated for expansion possess more potential to replicate past successes.
As the market continues its upward trajectory, three high-flying stocks demonstrating valuation aligned with fundamentals, positioning them for new highs, are discussed.
Eli Lilly (LLY)
Eli Lilly (NYSE:LLY) is one of the high-flying stocks that have increased by almost 63% this year. This happened primarily due to the company entering the diabetes and weight loss markets. It markets Mounjaro for diabetes control and Zepbond for weight loss, both containing the active ingredient tirzepatide, which is a GLP-1 receptor agonist.
This is important as JPMorgan (NYSE:JPM) estimates the global GLP-1 market will reach $71 billion by 2032, with Eli Lilly controlling 45% of this sector. For comparison, the company reported a total revenue of $8.8 billion in the first quarter. Eli Lilly forecasts that its diabetes and weight loss drugs will substantially contribute to increasing revenue between $40.4 and $41.6 billion. This represents a 20% increase at the midpoint, making LLY stock one to consider buying.
Naturally, Eli Lilly has more medications than just weight loss drugs, which are receiving significant media attention. In fact, it has an extensive pipeline of several dozen therapies in development. Just this month, it received FDA approval for Kisunla for treating Alzheimer’s, which analysts expect could generate $5 billion in annual revenue at its peak.
Wingstop (WING)
Wingstop (NASDAQ:WING) has experienced substantial growth recently, one of the high-flying stocks soaring 100% in the last year alone. As a fast-casual chicken wing restaurant chain, demand for its product has remained strong. This year, the WING stock price has increased by around 51%. Yet, it remains one of the stocks to buy.
The company’s financial performance has been solid. Sales grew impressively by 37% over the last year, with a focus on digital promotion contributing to a 68% rise in online sales. Notably, net income increased substantially by 84%, partly due to an aggressive new restaurant opening strategy and a 22% increase in same-store sales.
Wingstop opened 283 new locations in the past twelve months alone. And it has set a target to open between 275 and 295 new restaurants this year as well. While this growth has gained some attention, analysts remain optimistic. Of 13 analysts covering the stock, 10 recommend buying as growth estimates hover below 40% for this quarter and above 20% for the next.
Apple (AAPL)
Apple (NASDAQ:AAPL), the technology company known for iPhone sales experienced uneven financial results over the past year. AAPL stock price declined in the first quarter, prompting some to question Warren Buffett’s large investment. However, Q2 earnings significantly exceeded expectations, sharply increasing Apple’s share price. Over the past three months, AAPL stock has witnessed a 36% upside, making it as one of the high-growth stocks to consider buying.
While overall revenue declined in Q2, Apple added $110 billion to its stock buyback program and increased its dividend. Subsequently, it announced plans to enter the artificial intelligence (AI) market with new Apple Intelligence features available later this year on its latest iPhones.
Both the company and analysts count on AI to boost device sales by restricting the technology to the newest models, motivating customers to upgrade. Revenue has also suffered from weak China performance and global inflation, which has reduced consumer spending.
Analysts forecast an Apple EPS growth of 15% to $6.61 for the current year, with overall sales expected to increase around 8% over the same period. Though not extraordinarily high growth, these projections justify Apple’s financial trajectory and as one of the stocks to buy. This is reflected in its forward price-to-earnings (P/E) ratio of 31.7x, below the 48.5x sector average.
On the date of publication, Stavros Tousios 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.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.