Some investors embark on the roads less traveled instead of sticking with reliable, mature corporations that have been around for decades. While blue-chip stocks have their place in many portfolios, investors can generate exceptional returns from high-potential stocks that have yet to mature.
A mature company is a firm that has been posting low-single-digit revenue and earnings growth over several years. Those firms have exhausted most of their runways and have limited growth opportunities — other than making acquisitions.
These revolutionary stocks break from that pattern and appear on the brink of growth. Investors may want to consider these high-growth potential stocks for outsized returns.
Super Micro Computer (SMCI)
Super Micro Computer (NASDAQ:SMCI) has been a top artificial intelligence (AI) stock for several years but its smaller market cap makes it less known than giants like Nvidia (NASDAQ:NVDA) and Microsoft (NASDAQ:MSFT).
The company’s AI servers are in high demand. That hasn’t been a secret to long-term investors. SMCI stock gained 474% over the past year and soared by 2,732% over the past five years. Despite the significant growth, SMCI only has a $24 billion market cap. The company has plenty of room to run.
Super Micro offered new guidance that revealed significant growth for the company’s IT solutions. The updated guidance forecasts revenue more than doubling year-over-year (YoY). The range is $3.60 to $3.65 billion in sales. The firm’s previous guidance was $2.7 to $2.9 billion.
The company is also forecasting substantial GAAP EPS growth, now forecasted to reach $4.90 to $5.05 per share. Assuming Super Micro reports $5 EPS and holds onto that number for the entire year, it’s trading at a forward P/E ratio in the low 20s.
Its strong guidance reminds me of when Nvidia raised guidance and impressed investors in 2023. The development makes Super Micro a candidate to outperform Nvidia in 2024.
Fortinet (FTNT)
Fortinet (NASDAQ:FTNT) has a long history of rewarding investors with stable profits and healthy revenue growth. Shares are up by 314% over the past five years. However, the stock hit a speed bump in August. The company’s stock dropped by 25% on August 4th after a disappointing earnings report.
The cybersecurity firm slightly trimmed its guidance. That was enough to send the stock spiraling. Fortinet faces short-term headwinds that should give way to growth later in the year. Even now, revenue and earnings growth aren’t terrible. Revenue increased by 16% YoY, while net income increased by 39.4% YoY in the third quarter.
Net income growth was fine, but investors are used to seeing revenue growth above 30%. Furthermore, billings only increased by 6% YoY, indicating the company is not yet out of the woods.
You’ll have to be patient with this cybersecurity stock. However, it’s one of the few companies with a reasonable valuation that doesn’t depend on rapid earnings growth acceleration. Shares trade at a 43 P/E ratio and a 37 forward P/E ratio.
The company has healthy free cash flow and has been repurchasing shares to elevate the stock price. Fortinet has been reliable for many years and can be on the brink of a new breakout once the firm indicates growth is returning.
Duolingo (DUOL)
The language learning mobile app and brand offer significant upside for long-term investors. The stock’s valuation remains a concern as the forward P/E is above 100. The firm has been reporting 40%+ YoY revenue growth for several quarters and continued the trend in the third quarter of 2023.
During that quarter, revenue increased by 43% YoY. Investors should expect elevated revenue growth to continue as the company also reported a 63% growth in daily active users and a 49% YoY increase in total bookings. Most of the company’s bookings are subscriptions, and that segment increased by 54% year-over-year.
Duolingo (NASDAQ:DUOL) helps people learn new languages and has expanded into other subjects like math and music. Shares have gained 125% over the past year but endured a sharp 19% correction over the past month. The firm recently became profitable, and expanding margins should improve the valuation. Further drops will make the buying opportunity more enticing.
On this date of publication, Marc Guberti held long positions in SMCI, FTNT and DUOL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
