Momentum is a powerful force in the stock market. Once a stock becomes popular, its ascent can defy logic and lead to a stretched valuation. While some popular stocks crash within a few months, others live up to the hype.
A swift recovery in 2023 has carried into 2024, with the S&P 500 and Nasdaq 100 both up year-to-date. Some investors look for opportunities to outperform the established benchmarks. While following the crowds isn’t always the best approach, strong fundamentals can justify a stampede among investors. These top stocks are generating plenty of attention.
E.l.f. Beauty (ELF)
E.l.f. Beauty (NYSE:ELF) is a beauty brand rapidly gaining market share and continues to reward long-term investors. The stock is up by roughly 1,800% over the past five years and is already off to a strong start with a 35% year-to-date gain. Shares trade at an 87 P/E ratio and are in the middle of a healthy correction.
High growth rates for revenue and earnings have propelled the stock over the years. The firm reported its 20th consecutive quarter of sales growth in the third quarter of fiscal 2024. It wasn’t a small growth rate either. Net sales were 85% higher in Q3 FY24 year-over-year (YoY).
Net income also got a strong boost and was up by 41% YoY. E.l.f. Beauty used some of those proceeds to acquire Naturism, a fast-growing, high-performance skin brand. The company funded the acquisition with cash and company stock.
The cosmetics company raised its fiscal 2024 outlook across the board. Net sales are expected to reach $980 to $990 million compared to $896 to $906 million in the previous fiscal 2024 outlook. The previous guidance also projected diluted EPS to range from $2.47 to $2.50, while it now ranges from $2.84 to $2.87 per share.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) has captured headlines for several years, but the artificial intelligence boom has created an incredible stampede among investors. The stock is up by more than 1,900% over the past five years and has already gained 82% year-to-date.
Although Nvidia has a 75 P/E ratio, the chipmaker’s revenue and earnings growth suggest a better valuation is on the horizon. Nvidia’s 265% YoY revenue growth and 769% YoY GAAP net income growth in Q4 FY24 outpaced the stock’s 1-year gain of 249%.
As long as net income growth keeps up with the stock’s appreciation, shares can continue to move higher. Nvidia’s profit margins have soared alongside its earnings, with net profit margins surpassing 50% for the past two quarters.
Nvidia has delivered generational gains for some investors. Some investors may feel as if the stock is due for a crash since assets don’t go up forever. However, Nvidia still has the financial strength and tailwinds to gain from here. The firm’s latest AI chips recently added more fuel to the rally.
Sterling Infrastructure (STRL)
Sterling Infrastructure (NASDAQ:STRL) is a construction company specializing in e-infrastructure. Many blue-chip companies turn to Sterling for assistance with developing data centers, e-commerce distribution centers, warehouses and more. It’s the company’s fastest-growing segment, but the corporation also offers solutions for transportation and home building.
The stock has done well so far. It’s up 770% over the past five years and has already gained 25% year-to-date. The firm generated $486.0 million in revenue and $40.2 million in net income in the fourth quarter of 2023. Those are YoY growth rates of 8.3% and 99%, respectively.
Sterling Infrastructure closed out the quarter with a $2.07 billion backlog. The company’s backlog exceeds the $1.97 billion it generated in full-year 2023. The firm still has a reasonable 24 P/E ratio and is valued at over $3 billion. The stock also has a reasonable 1.09 PEG ratio.
On this date of publication, Marc Guberti held long positions in ELF and NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
