After a rocky couple of years, there finally seems to be some light at the end of the tunnel for growth stocks. Interest rates have stabilized, and the economy is again showing signs of strength. Of course, whispers of a potential recession still abound. That’s a risk I choose to balance by allocating part of my portfolio to sturdy, recession-resistant stocks, while reserving another part for high-upside growth plays.
Lately, many Wall Street analysts have taken notice of the improving fundamentals for many beaten-down growth stocks. With markets and economies naturally cyclical, some of the hardest-hit innovators and disruptors now stand to experience a surge as conditions improve. I’m always listening when analysts call out stocks with the potential to double within a year.
Of course, conducting your own due diligence is a must before jumping into any single investment. Not all analysts end up being right with their predictions and targets (far from it). However, I believe these rapidly-growing companies have strong enough foundations and trajectories to have a good shot at meeting these ambitious price objectives. Let’s take a look!
Power Solutions International (PSIX)
Power Solutions International (OTCMKTS:PSIX) has been absolutely decimated, with shares down 97% from their all-time highs. Naturally, such a drastic decline is for good reason. This company has burned through tens of millions of dollars over the past decade with no profitability to show for it. While revenue has grown steadily, the company’s lack of profits has eroded its valuation.
However, I believe Power Solution’s fortunes are changing. The company has been trending upwards in recent months as profitability takes hold. In fact, trailing 12-month net income sits at a record $27 million, and that’s against a tiny market capitalization of just $60 million. Thus, the company’s price-to-earnings ratio is a measly 2.5-times on a trailing basis.
Looking ahead, analysts expect 55% earnings growth this year, putting the stock’s forward price-earnings ratio at an equally-tiny 2.2-times. For 2024, these same analysts forecast 14% profit growth.
Renewable energy and emissions reduction are megatrends that will only accelerate. As such, now is an opportune time to invest in PSIX stock before Mr. Market rerates this stock higher. Power Solutions now looks deeply undervalued, with surging profitability that continues to surprise analysts. Last quarter, the company delivered a 255% positive earnings surprise versus expectations. With all that in mind, it’s no shock that the sole recent Wall Street price target of $6 per share implies 127% upside in one year.
Ocuphire Pharma (OCUP)
Clinical-stage biotech stocks undoubtedly carry substantial risk, but the rewards can be equally substantial with success. Ocuphire Pharma (NASDAQ:OCUP) fits that billing as a promising, albeit high-risk name with strong momentum.
Ocuphire Pharma focuses on developing and commercializing new ophthalmic therapies targeting retinal and refractive disorders. These end marks are large, by any measure. The company boasts two promising assets: APX3330 and Phentolamine Ophthalmic Solution 0.75%.
APX3330 aims to address diabetic retinopathy and diabetic macular edema as an oral therapy that suppresses angiogenesis and inflammation. The company recently reported positive Phase 2 data showing APX3330 prevented clinically meaningful disease progression in DR patients. Management also secured an FDA nod to advance the drug into Phase 3.
At the same time, Ocuphire’s second asset was already approved by the FDA last quarter under the brand name RYZUMVI. This phentolamine eye drop reduces pupil size and improves visual acuity with applications in reversing pharmacological pupil dilation or treating presbyopia and night vision disturbances. The company partnered with pharma giant Viatris (NASDAQ:VTRS) to commercialize this product.
In its latest third-quarter results, Ocuphire generated a loss of $5.6 million on $11.9 million of revenue stemming largely from the RYZUMVI deal with Viatris. Thus, the company ended Q3 holding $42.4 million in cash – sufficient to advance operations through 2025 by management’s projections.
Naturally, clinical-stage biotechs are inherently risky. However, Ocuphire seems to present an intriguing risk-reward ratio at current levels. Shares trade around $2.70 per share, equating to a tiny $62 million market cap. Meanwhile, analysts share a unanimous price target of $20 per share, implying a massive upside of 633%.
I believe speculative investors searching for multi-bagger potential may find the risk worth taking with Ocuphire Pharma. The company’s current valuation leaves substantial room for growth, if execution remains on track.
As a general rule, I avoid covering international stocks, given the additional risks beyond typical domestic equities. However, Turkey-based e-commerce standout D-Market (NASDAQ:HEPS) presents a simply too-good-to-ignore opportunity.
That said, HEPS stock does not look enticing on the surface, given Turkey’s unfortunate inflation troubles and a policy response that leaves more to be desired. Yet, I believe those macro headwinds are already fully priced into this fallen growth stock.
Analysts forecast D-Market’s earnings to almost double from 2023 to 2025 alongside similar revenue growth. Thus, HEPS stock trades at just 0.5-times forward sales two years out, while delivering nearly 100% annual top-line and bottom-line expansion. That valuation seems outright silly to me.
Remember that Turkey has made some progress stabilizing from runaway inflation and currency devaluation, albeit gradually. The latest interest rate hike to 40% should continue moving things in the right direction over the long run.
In my opinion, investors with higher risk tolerance may find huge upside in buying this Turkish e-commerce play while it trades at a considerable discount. D-Market appears well positioned to ride e-commerce adoption tailwinds in a growth market which underpins its attractive growth profile. Sometimes, the greatest rewards come from places one least expects. The average price target fro this stock implies 134% upside.
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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.