Investing in low-cost growth stocks requires understanding the underlying companies’ fundamentals. Monitoring the core metrics and operational strengths is vital to assessing a company’s long-term viability and growth potential.
Take, for instance, the first company, which shows remarkable improvement in credit performance with a notable reduction in its net charge-off rate. Meanwhile, the second company successfully exceeds its cost reduction targets. It significantly lowered operating expenses and boosted profitability through strategic restructuring. The third company on our list demonstrates exceptional capital management. It uses debt issuance strategically to boost cash flow and navigate market uncertainties. Moreover, the fourth company achieved its first profitability milestone, showcasing effective cost management and operational efficiency.
Similarly, the fifth stock listed here represents a company that significantly reduced production costs, increased operational efficiency and expanded reserves. The sixth company maintained its top position in its field by attaining high top-line growth and improved profitability through sharp cost management and market penetration. Finally, the seventh company demonstrates impressive financial performance and operational improvements.
In short, each of these low-cost growth stocks represents a company with unique fundamentals, making them compelling choices for potential high returns.
OppFi (OPFI)
OppFi (NYSE:OPFI) specializes in credit performance and financial services. It achieved a 1.1 percentage point improvement in the net charge-off rate, which reduced the rate to 47.9% (in the first quarter), indicating reduced risk and improved credit quality. Effective credit risk management and underwriting processes help maintain financial stability. A 33.5% increase in recoveries further shows improved credit performance. Recovering more from previously charged-off loans mitigates loan defaults’ impact.
Moreover, early-stage delinquency rates also improved significantly. The first payment default rate decreased by 0.4%. The total delinquency rate fell by 0.7% compared to last year. These improvements signify stronger credit quality and better customer payment behavior. Lower delinquency rates suggest effective credit risk assessment models. Stronger customer payment behavior supports sustainable revenue and profitability growth.
Finally, OppFi is noted for improved credit quality and risk management, making it a standout in low-cost growth stocks.
Pitney Bowes (PBI)
Pitney Bowes (NYSE:PBI) excels in providing in-office services and supplies and focuses on cost reduction and operational efficiency. The company improved its financial performance significantly. It has exceeded its cost savings target of $75 million to $85 million in the first quarter. The restructuring plan’s success is evident in cost savings and expense decline. Pitney Bowes now expects to surpass the high end of this target.
Operating expenses dropped 8% year-over-year from a year ago, enhancing financial health. Segment performance shows strong growth potential, with key segments including SendTech, presort services and global e-commerce.
Further, SendTech’s earnings before interest and taxes, or EBIT, grew 6% to $101 million despite a 2% revenue decline. Shipping-related revenue grew 8%. Software-as-a-service (SaaS) subscription revenue increased by 40%, showing strong growth potential. Presort services achieved record revenue and EBIT. Revenue rose 7% to $170 million, while EBIT reached $40 million.
Overall, successful restructuring and cost-saving measures position Pitney Bowes as a strong candidate among low-cost growth stocks.
Garrett Motion (GTX)
The technology leader Garrett Motion (NASDAQ:GTX) manufactures automotive parts and equipment. Garrett issued $800 million in senior unsecured notes in the second quarter. This move generates annual cash interest savings of $15 million. Reduced debt and interest expenses improve financial stability.
In the second quarter, Garrett repurchased $65 million of common stock. The total repurchased in the first half of 2024 reached $174 million. This strategy signals confidence in future growth prospects. The company ended the quarter with solid liquidity of $698 million. This includes $600 million of undrawn revolving credit and $98 million of unrestricted cash.
Additionally, Garrett has ample financial flexibility for economic uncertainties and growth opportunities. Its strength is adapting its cost structure to industry volatility. Garrett offset reduced sales through operational productivity and cost control. The adjusted EBITDA margin remained resilient at 16.9% despite a 12% drop in net sales.
In summary, effective capital management and share repurchase strategies enhance its appeal, making it a top pick among low-cost growth stocks.
Tuniu (TOUR)
The online leisure travel company Tuniu (NASDAQ:TOUR) is based in China provides hospitality services, including hotels, resorts, and cruise lines. Tuniu achieved GAAP profitability in the first quarter. The company reported net income of RMB 22 million ($3.03 million), which marks a significant milestone for Tuniu. Last year, the company had a loss of RMB 5.9 million.
Operating expenses increased by 25% from a year ago to RMB 69.7 million. The proportion of operating expenses relative to net revenues decreased significantly.
Moreover, total operating expenses as a percentage of net revenues dropped by 20 percentage points. Indeed, this decline indicates improved operational efficiency. Research expenses decreased by 9% to RMB 13 million. Research and development costs as a percentage of net revenues dropped from 22.7% to 12.1%, indicating Tuniu’s efficient resource allocation. The company’s cost-control measures in research are effective.
Finally, Tuniu’s recent profitability and improved efficiency contribute to its selection on the low-cost growth stocks list.
Nexa Resources (NEXA)
Nexa Resources (NYSE:NEXA) is a diversified metals and mining company in Brazil. In the first quarter, metal sales totaled 139,000 metric tons. This marked a 4% year-over-year decline, caused by lower production volumes and seasonal demand. Additionally, the cost of smelting cash fell to 98 cents per pound, a 22% decrease from $1.25 per pound a year ago. Lower raw material costs and decreased zinc prices drove this reduction. Conversion costs were 30 cents per pound, down from 31 cents a year ago. Hence, lower variable and energy costs contributed to this decrease.
Further, capacity utilization for the company’s Aripuanã’s mine increased to 70% in April from 57% in Q1 2024. Zinc recovery improved to 73% in March from 66% in December 2023. The company’s Cerro de Pasco project has a sharp 59% increase in mineral reserves.
Nexa’s overall mineral reserves grew 10% in 2023 against 2022. Moreover, progressive exploration and drilling activities boosted reserves. In short, improved cost efficiencies and enhanced production make Nexa a top pick among low-cost growth stocks.
High Tide (HITI)
High Tide (NASDAQ:HITI) is a Canadian cannabis company that operates in the pharmaceuticals sector, focusing on drug development and distribution. In the second quarter, High Tide recorded $124.3 million in revenue, marking a 5% increase from a year ago. The company surpassed $500 million in trailing 12-month revenue. With that, High Tide, Canada’s highest revenue-generating cannabis company, maintained this lead for almost two years.
Additionally, the company’s core brick-and-mortar segment grew by 11% from a year ago, accounting for 93% of the company’s top line. This outperforms peers, who average $923,000.
High Tide’s average Ontario store had a $3.4 million annual revenue run rate. The gross profit for the quarter was $35.3 million (up 12% from year ago. The gross profit margin improved to 28.4%, which was the highest in nine quarters.
Indeed, High Tide’s financial stability and cost management highlight its growth potential, standing out in the low-cost growth stocks category.
Lifestance Health (LFST)
Lifestance Health (NASDAQ:LFST) offers mental health services in a telemedicine format. The company’s bottom line is solid. Adjusted EBITDA for the first quarter was $27.7 million, a massive 174% increase from the previous year’s $10.1 million. The adjusted EBITDA margin improved to 9.2%, up from 4% in Q1 2023. This growth is due to higher revenue per visit. Enhanced operating leverage also played a key role.
Moreover, the company scaled efficiently while controlling costs. LifeStance achieved a 36% increase in center margin, which reached $94.7 million, or 31.5% of total revenue. The center margin as a percentage of revenue grew nearly 4 percentage points year over year, reflecting effective cost management and operational efficiencies.
Indeed, the increase in the center margin indicates improved profitability. Real estate optimization and operating leverage drove this improvement. Efficiently managing center costs and higher revenue per visit contributed to this success. LifeStance has shown it can scale operations profitably. Strong financial performance and operational improvements make it a top pick among low-cost growth stocks.
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On the date of publication, Yiannis Zourmpanos did not hold (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.