The stock market has been on a tear lately. The Nasdaq continues to hover near record highs, fueled by the mostly-rallying “Magnificent Seven” mega-cap technology stocks. But while tech giants grab the headlines, savvy investors know that extraordinary gains can also be found in lesser-known growth stocks during bull market rallies.
While your core investments should always revolve around larger and more established companies, buying smaller companies before the crowd catches on can be a lucrative growth investing strategy. Thus, with market sentiment shifting and the Federal Reserve likely to cut rates mid-year, I believe now is an opportune time to invest in the next potential multi-bagger growth opportunities. Risk appetite is starting to pick up, rates look to be heading down, and there’s still lots of cash on the sidelines, ready to chase returns.
Here are three growth stocks to look into, for those who buy into this thesis.
ON Holding (ON)
ON Holding (NYSE:ONON) is a Swiss company that produces performance running shoes and clothing. Founded in 2010 with the goal of “revolutionizing” the sensation of running, ON is known for its patented CloudTec® technology that provides soft landings and explosive takeoffs for runners.
To date, ONON stock has been slowly cruising up since the start of 2023, gaining around 75% since January 2023 despite some recent consolidation. More importantly, the company’s management team has continued executing with precision. ON has cooled off a little in 2024, but I see long-term gains ahead. The company boasts a product line that appeals to performance runners and casual consumers alike, helping sales surge 46.5% year-over-year in the third quarter of last year. Its latest quarterly report showed a revenue and earnings per share beat of 47% and 5%, respectively.
Zoom out further, and the growth becomes much more impressive. In 2019, ON generated $267 million in revenue with $1.5 million in losses. Now, analysts expect $2.1 billion in sales for 2023, up 57% year-over-year. Moreover, this growth is projected to continue, with revenues potentially reaching $6 billion by 2028. I believe ON could grow even larger, given its tendency to handily top estimates. The company’s earnings per share are also expected to multiply by up to five times over the next five years. Considering al these factor, ONON stock remains a strong buy, in my view.
Redwire (NYSE:RDW) is a company that manufactures and supplies specialized equipment for space missions, including solutions for solar power generation, in-space 3D printing, robotics, and more. With decades of flight heritage, Redwire is well-positioned to capitalize on surging private and public investments in space infrastructure.
The space industry has seen a resurgence in recent years driven by exciting new projects like SpaceX’s Starlink, NASA’s Artemis missions, and, most importantly – mounting competition with China’s space program. Many believe we may be entering a new space race if not already engaged in one.
Looking at Redwire’s financials, it’s clear the company is executing well regardless of industry catalysts. Revenue jumped 68% year-over-year in Q3 2023, allowing the company to beat earnings per share estimates by 50%. The stock price has consolidated since mid-2022, but appears to be lifting off again.
Redwire may also reach profitability sooner than expected, despite the capital intensive nature of its business. With an estimated total addressable market between $100 and $140 billion over the next five years, Redwire has ample room for growth. Thus, tailwinds in the space industry could carry RDW stock significantly higher over the long-term, though a lack of profits makes this stock a speculative play right now.
indie Semiconductor (INDI)
indie Semiconductor (NASDAQ:INDI) produces semiconductors and software that enhance safety, environmental performance, and the overall driving experience for consumers. While supply chain woes have battered the auto sector and many EV stocks recently, indie has held up surprisingly well by comparison, recovering 17% over the past week following some rather sharp declines.
The company’s resurgent financials also reinforce the bull case for INDI stock right now. The company’s revenue doubled over the past year to $60.5 million in Q3 2023, with losses cut by 54% on a year-over-year basis. The company is expected to turn profitable in 2024, and rapidly grow its earnings over the long-term. In fact, 2025 earnings estimates put indie’s forward price-earnings ratio at just 13-times. That’s extremely cheap relative to its semiconductor peers. Sales are also projected to double to nearly $500 million by 2025.
As interest rates decline and automotive volumes reaccelerate, INDI stock may recover very well over the coming months. The company’s capabilities in key business segments including sensors, compute, power management and connectivity position indie well to capitalize on secular growth trends including vehicle electrification, advanced driver assistance systems (ADAS), and autonomous driving. So, while prone to volatility, indie Semiconductor offers substantial upside for patient investors.
On the date of publication, Omor Ibne Ehsan 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.