In this shaky market, many investors seek shelter in stable, mature companies trading at modest valuations. But for those with higher risk appetites, compelling opportunities exist among early-stage disruptors poised for hypergrowth returns. Though more speculative, these emerging innovators can deliver exponential returns if their visions play out.
Of course, chasing hypergrowth stocks is risky. These are not stable blue-chip stocks. Many speculative companies fail, and choppy broader market pressures could cause more short-term pain for these companies. Plus, it is hard to judge any short-term uptrend as a turnaround, and I would choose some intrinsically strong companies instead of trying to time the market.
With that in mind, let’s look at the following three hypergrowth stocks, for those looking to take a more aggressive stance right now.
Datadog (DDOG)
Datadog (NASDAQ:DDOG) has transformed into a cloud monitoring powerhouse, but the market has yet to fully appreciate its upside. This monitoring and analytics platform for cloud applications has over 26,100 customers, including enterprise giants like Tesla (NASDAQ:TSLA), IBM (NYSE:IBM), and Microsoft (NASDAQ:MSFT). However, the stock plunged more than 58% in 2022 amidst broad multiple contractions for high-growth software stocks. Thankfully it is now in recovery mode, with the stock up over 41.3% year-to-date.
Indeed, I believe the stock’s previous selloff was overdone. However, there’s a long way to go before DDOG stock makes a full recovery. Datadog is still posting robust growth, despite economic uncertainty. Revenue surged 25.4% in Q2 2023, with the company bringing in earnings per share of 36 cents, which beat estimates by 8 cents. Moreover, Datadog’s growth is actually reaccelerating. Sales growth is expected to hover between 20-30% through 2031. The company even posted its best-ever quarter for new logo clients, proving demand remains strong.
Critically, profitability is now coming into focus. The company is expected to expand its profits 10-fold, from 2023 to 2031. This should help it meet the rule of 40 requirement that many investors see as key.
Looking ahead, Datadog’s growth story remains intact. The company’s management team currently estimates its addressable market is $45 billion, but expects it to reach $62 billion by 2026 as cloud adoption proliferates. Cloud monitoring spending is forecasted to grow 24% annually through 2030. Datadog is the clear leader in this space and is still gaining share.
Meanwhile, new security, AI, and automation product launches expand Datadog’s capabilities and customer wallet share. Over 30% of clients now use new products launched since 2021. With revenue rapidly scaling and profitability improving, and yet shedding over half its value, DDOG presents a compelling opportunity while still early in its journey.
International Seaways (INSW)
With oil prices soaring since Russia’s invasion of Ukraine, tanker stocks are also prospering, in under-the-radar fashion. That said, most tanker stocks remain overlooked, creating huge disconnects between fundamentals and valuations. Take International Seaways (NYSE:INSW) for example, one of the world’s largest oil tanker operators.
Demand for oil tankers has surged, as companies scramble to shuttle supplies as trade flows shift globally. Sanctions exclude Russian seaborne volumes, increasing ton-mileage for available tankers. INSW’s fleet operates crucial routes exporting from the Americas and the Middle East, where production is rising. This perfect backdrop enabled massive profits over the past year.
INSW earned $615 million in net income over the last four quarters. After dividends and buybacks, the company has returned $360 million to shareholders. That represents a whopping 17% yield on its market cap. Despite these exceptional results, a valuation disconnect persists. INSW trades at just 4-times forward earnings, and less than book value.
This disconnect exists because many expect the tanker boom to end if the Russia-Ukraine war concludes. However, signs point to the conflict dragging on as neither side will capitulate. Even if it ended, sanctions preventing seaborne Russian oil exports would persist. EU embargoes expand later this year. So, demand tailwinds for INSW’s fleet remain strong.
With a rock-bottom valuation against a backdrop of spiking oil shipments, INSW offers intriguing upside. The company estimates oil demand will hit 102 million barrels per day in the back half of 2023, up 2 million from last year. If INSW simply maintains its present earnings power, shares could double. But this high-quality tanker operator should sail far higher with secular growth in seaborne oil flows.
JinkoSolar (JKS)
As a leading global solar module supplier, JinkoSolar (NYSE:JKS) benefits from surging clean energy demand. However, policy risks surrounding Chinese companies, plus solar industry volatility, have weighed heavily on shares. JKS stock currently trades nearly 60% below 2021 highs, presenting a golden buying opportunity.
From a fundamentals perspective, JinkoSolar is firing on all cylinders. Total revenue jumped 63% year-over-year in Q2 2023 to $4.2 billion, as total shipments exceeded 18 gigawatts. And with scale benefits kicking in, gross margins expanded substantially from 14.7% to 15.6%. JinkoSolar also earned $3.52 in diluted earnings per share, representing stunning earnings growth. This beat estimates by a $2.26. Yet, the stock has slumped by nearly 30% year-to-date.
The company sees robust growth continuing. It expects full-year module shipments between 70-75 gigawatts, up from prior guidance of 60-70 gigawatts. Management notes its order visibility has reached 80% of the guided range, with overseas orders making up the majority. Additionally, JinkoSolar continues to lead the industry transition to next-gen, high-efficiency N-type products.
Despite excellence operationally, JKS stock trades at just 0.09-times sales and 3-times forward earnings. Notably, the company managed to avoid recent U.S. tariffs on Chinese solar companies. For ESG-focused investors, JinkoSolar also leads its peer group in environmental initiatives as a top performer on the S&P Global ESG rating for PV companies. In the long-run, I see substantial upside for JKS stock, once this bearish momentum starts to fade.
On the date of publication, Omor Ibne Ehsan 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.
