The markets witnessed a meaningful correction in 2022. The current year has provided some respite to investors, but the real momentum in growth stocks is yet to be seen. This is a positive for investors waiting to take a plunge in the markets. I believe that there are multiple stocks with 2x potential by 2025.
Of course, this is a conservative estimate and there can be a bigger impending rally. It’s interesting to note that business developments in several growth companies have been strong, but the stock has remained relatively depressed. The rally, when it comes, can therefore be big.
Let’s discuss three stocks with 2x potential by 2025 with a focus on the businesses’ upcoming catalysts.
Miniso Group (MNSO)
Miniso Group (NYSE:MNSO) stock has skyrocketed by 272% in the last 12 months. I believe that the rally from oversold levels will sustain with the company delivering strong growth metrics. Further, a forward price-earnings ratio of 36.05 looks attractive for a high-growth stock.
As an overview, Miniso is a retailer and wholesaler of lifestyle products. For Q4 2023, Miniso reported 40.3% growth in revenue on a year-over-year (YOY) basis. For the same period, the company’s gross margin was 39.8%. Robust growth along with healthy margin expansion is likely to ensure that MNSO stock continues to create value.
It’s worth noting that Miniso reported 5,791 stores as of June. On a YOY basis, the number of stores increased by 592. The company has been pursuing aggressive expansion in China and internationally. This will add to the sales growth momentum coupled with the expansion in the company’s product basket.
Albemarle Corporation (ALB)
Albemarle Corporation (NYSE:ALB) is possibly among the most undervalued high-growth stock picks. At a forward price-earnings ratio of 5.66, ALB stock looks poised for multibagger returns by 2025. The reason for ALB stock being depressed is the correction in lithium in 2023.
However, there are two points to note. Even with relatively lower realized price, the company is delivering robust revenue and cash flows. Further, the long-term outlook for lithium is strong and this correction provides a golden entry opportunity.
For Q2 2023, Albemarle reported revenue and EBITDA growth of 60% and 69% respectively. The company has guided for 2023 revenue growth in the range of 40% to 55%. Furthermore, Albemarle expects to deliver operating cash flow of $1.5 billion for the year. Clearly, considering these numbers, the stock is massively undervalued.
It’s also worth noting that Albemarle has guided for 20% to 30% annual growth in lithium sales volume through 2027. Therefore, strong growth will sustain backed by high financial flexibility. Once lithium begins to trend higher, the free cash flow outlook is likely to be robust.
Li Auto (LI)
Li Auto (NASDAQ:LI) is possibly the best pick from China’s electric vehicle industry among high-growth stocks. LI stock has surged by 86% year-to-date. The recent correction from high seems like a good opportunity to accumulate as I expect the uptrend to sustain.
There are two important reasons to be bullish on Li Auto. First, the company is on a high-growth trajectory backed by the launch of several new models. For Q2 2023, Li reported deliveries of 86,533, which was higher by 201.6% YOY.
Further, Li Auto has the best vehicle margin when compared to peers like Nio (NYSE:NIO) and XPeng (NYSE:XPEV). For Q2 2023, the company reported vehicle margin of 21%. It’s also worth noting that Li reported free cash flow of $1.3 billion for the quarter.
With cash and equivalents of $10.2 billion coupled with robust FCF, Li Auto has high financial flexibility to invest in innovation. Additionally, the company is pursuing aggressive retail expansion within China. I also believe that international expansion is likely relatively soon.
On the date of publication, Faisal Humayun 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.
