Stocks with potential are probably not everyone’s cup of tea right now. With talks of an impending recession, everyone is looking for safer options. However, Shelby Davis once famously said, “Invest for the long haul. Don’t get too greedy, and don’t get too scared.”
Although stock indexes are lackluster, it’s important to think ahead to the next bull market, regardless of whether it’s imminent or further down the line. Focusing on the future will allow you to prepare your portfolio for the worst-case scenario. It will also position you for success when the market inevitably improves.
Selecting the best stocks with potential can be challenging for investors. While some stocks with potential can offer rapid returns as optimism about the future rises, a souring outlook can lead to a significant decline in value. Therefore, it’s recommended that investors opt for proven companies with a track record of expansion and success.
While past performance does not guarantee future returns, it’s reasonable to assume that companies riding big-picture trends will probably continue growing as long as they persist. By prioritizing proven companies that align with mega-trends, investors can take a responsible approach to buy stocks with potential.
Exact Sciences (EXAS)
Exact Sciences (NASDAQ:EXAS), a medical diagnostics firm, is one of the best stocks with potential.
The company is addressing a critical and ongoing need in the healthcare industry with its innovative approach. It provides minimally invasive cancer screening and diagnostic tests, essential components of preventative medicine.
The addressable market for this type of service is vast, encompassing nearly everyone as a potential customer. As a result, the company consistently achieves sales and profit growth. Because of the demographic shift in the United States towards an aging population, the outlook for increasing demand in the coming years is promising.
The company projects its 2023 revenue to fall between $2,265 million and $2,315 million, showing an astounding 683% growth in its top line within five years. This impressive expansion is a testament to the company’s significant progress over the years, with its cancer screening tests gaining widespread acceptance.
Despite progress in reducing losses, the company’s financials still present a challenge, with a net loss of $127.7 million, or $0.72 per share, in the fourth quarter, compared to the previous year’s net loss of $220.6 million, or $1.28 per share. This financial setback might give some investors pause, especially given the current bearish market environment.
Exact Sciences will only grow from here. With a favorable outlook for secular growth in the years to come, the stock has the potential to emerge as a clear winner in the coming decade if management successfully reduces costs.
Visa (NYSE:V) is legendary in financial services. As a Warren Buffett favorite, the stock regularly receives massive attention among the broader investment community.
Currently, Visa’s stock is trading at a PE ratio of 30.4, which is a discount compared to its historical highs. Over the past ten years, Visa’s PE ratio range has been between 19.66 (minimum) and 84.19 (maximum), with a median of 33.07. Therefore, Visa’s current PE ratio is below its historical median, showing it may be undervalued.
Why is Visa stock down? Well, there are a couple of factors at play. First, we are seeing a general slowdown in growth and spending, which does not bode well for Visa’s prospects.
Secondly, Visa, for the longest time, has commanded a premium in its industry. However, with the markets cooling off, investors are taking less interest in stocks with growth potential. During volatile times, investors pour capital into safer avenues such as utility and dividend stocks. We see the same trend in 2023.
That opens up a great opportunity for you to look into Visa. Its latest financials confirm its health and vitality. Visa beat first quarter fiscal 2023 earnings estimates, fueled by a rise in cross-border travel. After adjustments, the company earned $4.6 billion, or $2.18 per share. The revenue generated was $7.9 billion under generally accepted accounting principles.
And the growth story is not over.
The worldwide trend toward cashless payments has been ongoing for years, but significant growth potential remains, particularly in emerging markets. Accounting firm PwC Global estimates that cashless payment volumes could double globally by 2030.
Despite the highly competitive nature of the payments industry, Visa, as the market leader, is likely to grow along with the industry.
Salesforce (NYSE:CRM), with ticker CRM, stands for “customer relationship management,” an essential approach for modern marketers and salespeople.
Salesforce provides measurable methods for tracking prospects and closing deals. As the industry’s gold standard, Salesforce holds an outstanding position in this field.
Salesforce’s position as the industry leader in customer relationship management makes it the preferred choice for new market entrants. Existing customers have greater revenue potential with ongoing product features and pricing enhancements. This established market dominance makes it highly improbable for any firm to challenge Salesforce’s position anytime soon.
However, the pressure has been increasing on Salesforce lately. The cloud software pioneer is under increasing pressure to prioritize profitability, leading to the departure of several executives.
This is a common occurrence at the end of an era, which, in this case, is the end of the easy-money economic policy era. The US Federal Reserve’s hawkish interest rate hikes aimed at combating inflation contributed to this shift.
Salesforce’s potential for growth warrants its inclusion in this list of stocks with potential, despite modest profits alongside strong revenue growth. Management acknowledges the need for change to sustain investor interest.
The company is taking profitability more seriously, with predicted profit margin expansion and introducing a share repurchase program to return excess cash to shareholders by reducing the overall share count. These actions suggest now is the perfect time to invest in Salesforce stock.
On the publication date, Faizan Farooque did not hold (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.