Many momentum stocks reward investors in the short term. These stocks tend to outperform the broader market during new developments, such as lower inflation readings and strong economic reports. However, some momentum stocks also have reliable underlying business models. These types of high-growth stocks can present attractive long-term opportunities.
Stocks like Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) have rewarded long-term investors with generational wealth. Some investors look for smaller companies that can potentially deliver exceptional returns over the long run.
Investing in momentum stocks is risky due to increased volatility. Many of these high-growth stocks receive high valuations because of what investors believe those companies can become. However, any cracks in the growth narratives can send growth stocks falling. That is why investors should weigh their risk tolerances when investing in momentum stocks.
If you want to get started with these investments, these are some of the top momentum stocks to consider.
Qualys (NASDAQ:QLYS) isn’t a flashy stock, but attractive fundamentals and expansion can make this company a long-term winner. The cloud security company reported 15% year-over-year increases in revenue and earnings in the most recent quarter. The company has a P/E ratio of 44 which is relatively low compared to other cloud security investments.
In the Q1 press release, Sumedh Thakar, Qlays’ CEO, expressed optimism about the company’s ability to achieve scalable and sustainable growth.
“As we continue to innovate and further expand our cloud platform capabilities, we believe we will be uniquely positioned as the fundamental cybersecurity risk management platform to solve modern security challenges at scale and drive durable, profitable growth.”
Qualys doesn’t have the same revenue growth as other growth stocks. However, the company’s healthy profit margins and positioning in a high-potential industry can help it generate positive returns for years to come.
Impinj (NASDAQ:PI) produces devices and software that wirelessly connect billions of items to business and consumer applications. Corporations like Adient, Cisco, Coca-Cola, Haier, and Top Golf use Impinj technology to track the movements of their resources. Consumers can also put Impinj’s tags on everyday items to ensure they don’t lose them. The company has developed over 4 million readers, connecting over 75 billion items in 95 countries.
Impinj reported excellent top-line growth in the first quarter. The company’s Q1 $85.9 million in revenue represents a 61% year-over-year increase. The company reported a net loss of $4.4 million, indicating that it is closing the gap in profitability.
For the next quarter, Impinj leadership offered guidance for $84 million to $87 million in revenue and net losses between -$6.8 million to -$5.3 million. The guidance calls for a revenue increase between 40.5% – 45.5%. Net losses can get trimmed in half year-over-year since Impinj reported an $11.5 million net loss in Q2 2022.
The stock is down by over 30% since the end of April but has more than tripled over the past five years.
Not all momentum stocks operate in tech. Wingstop (NASDAQ:WING) is far from a tech stock. With its decor and jet aviation theme, this retro restaurant chain makes customers feel like they’re in the 1930s and 1940s.
The stock offers a dividend, but few investors buy WING shares for the yield. Shares have roughly doubled within the past year, and they are up by over 250% over the past five years. The company has a market cap of just shy of $6 billion. Wingstop recently opened its 2,000th restaurant and has the resources to expand.
Q1 revenue increased by 42.7% year-over-year, and net income delivered larger gains. Net income reached $15.7 million, representing an 80.6% year-over-year increase. The company has been growing at a fast clip for some time. In fact, Wingstop recently had its 20th consecutive year of same-store sales growth and another year of record unit growth. The only thing that may scare investors is the 97 price-to-earnings (P/E) ratio. However, if the company continues to report exceptional earnings and expand operations, the P/E ratio can become more reasonable in the future.
On this date of publication, Marc Guberti 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.