Growth investing can lead to considerable gains in the stock market. Indeed, research has shown that revenue growth best predicts a stock’s long-term returns. There are many growth stocks to buy today that have secular growth trends underpinning their growth trajectory.
However, finding profitable growth stocks is always a challenge. Most growth stocks exhibit solid top-line growth but come short in terms of profits. As a result, they lack fundamental earnings to value the stock against. In some cases, they rely on the market for capital, which can be risky.
Still, some rapidly growing stocks are profitable. These stocks are increasing revenues way above the rate of the S&P 500 index. Additionally, their management teams have focused on growing profitably. So far they are executing impressively, with all three reporting GAAP profits in their latest quarters.
Despite the current growth rates, these stocks are just getting started. Expect more growth opportunities looking ahead. Buy these three growth stocks today for further gains down the road.
Oddity Tech (ODD)
Oddity Tech (NASDAQ:ODD) is a recent IPO listing revolutionizing the beauty industry. Through proprietary technology and its direct-to-consumer platform, the company is changing the production, distribution and application of skin and lip beauty products.
It’s leveraging technology to create beauty and wellness products with excellent performance and functionality. Its IL MAKIAGE was the fastest-growing global beauty direct-to-consumer brand between 2020 and 2022. Through its direct-to-consumer approach, its driving more customer traffic to its platform. Already, it has amassed over 4 million active customers.
The marketplace has tutors who educate consumers on how to use their products. As a result, their products have gained massive traction with over 40 million visitors to its site.
As the company revolutionizes beauty, it’s one of the growth stocks to buy today. Quarterly results were released on August 9th, showing revenues grew a healthy 55% YOY to $151.3 million compared to $97.7 million in the prior year quarter. In addition, the company reported $41.8 million in adjusted EBITDA, highlighting the strength of its operating model.
Given the revenue momentum, management raised their outlook. Chief Financial Officer (CFO) Lindsay Drucker Mann stated, “We now expect full year net revenue to increase between 46-48%, compared with our prior expectation of a 40% increase.”
With profitable growth, Oddity will soar as it exceeds expectations. The company wants to disrupt the beauty industry. So far, management’s blueprint is working.
Celsius Holdings (CELH)
Celsius Holdings (NASDAQ:CELH) is an energy drink company with a proven growth engine. Sales have grown 7x in the past three years, from $130 million in 2020 to $952 in the last twelve trailing months.
Sales growth is accelerating, as shown by the last three quarterly reports. Year-over-year growth in the quarters ended December 2022, March 2023 and June 2023 was 70%, 94% and 112%, respectively.
The recent performance in the second quarter was a record with several milestones. Sales rose 112% YOY to a record $326 million, the first quarter above $300 million. Furthermore, according to IRI, the company increased its market share in the energy drink category to 8.6%.
The company also hit a new record on Amazon. Sales on the channel were up 108%, with the brand holding the second spot in the energy category with an 18.6% market share.
Despite the substantial post-earnings surge, Celsius remains one of the top stocks to buy today. In the conference call, management highlighted the considerable growth opportunities, especially with their Pepsi partnership.
“We believe there is a significant opportunity for incremental growth going forward with PepsiCo over the next three to five years,” outlined CEO John Fieldly. And without question, there is enormous potential in the international market. In the second quarter, international sales were only $15.1 million, about 5% of total sales, leaving room for significant expansion. By leveraging Pepsi’s global scale, international sales will drive growth.
As Celsius builds awareness and gains new consumers, dollar and unit growth will continue.
Arista Networks (ANET)
At a forward P/E of only 30, Arista Networks (NYSE:ANET) is one of the cheapest growth stocks to buy. The company provides data center switching equipment and software.
Over the past several years, Arista Networks has enjoyed strong demand from the data center build-out. It counts major hyper-scalers as customers, including Meta Platforms (NASDAQ:META) and Microsoft (NASDAQ:MSFT) who accounted for over 10% of revenues in 2022.
Now the company is experiencing a second revenue tailwind. As artificial intelligence applications increase, enterprises need more data centers. Most hyperscalers are increasing their 2024 budgets for data centers to be used in AI model training.
Second quarter results highlighted the strength in the business. Revenues grew 8% sequentially and 39% YOY to $1.4 billion. Non-GAAP net income also rose to $501.2 million from $342.7 million in the previous year.
Strong demand and market share growth are underpinning the strong revenues. Cisco Systems (NASDAQ:CSCO) has traditionally dominated the networking equipment market. However, Arista is now disrupting the space with better products. Furthermore, its leaf-spine architecture in the data center offers performance benefits. As a result, some hyper-scalers are shifting their orders from Cisco to Arista.
Management reiterated the rosy outlook calling for over 30% revenue growth in FY2023. TipRanks analysts concur and are optimistic seeing further upside in ANET stock. The average price target is $199 representing a 14% upside.
On the date of publication, Charles Munyi held Celsius Holdings (CELH) stock and did not hold (either directly or indirectly) any positions in other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
