Some investors prefer to construct their own portfolios in hopes of beating the stock market. Most people with this objective prioritize growth stocks that exhibit promising catalysts. This has led to this list of the most undervalued growth stocks to buy in April.
While growth stocks give you the best shot at outperforming the stock market, these same investments can lose significant value if the growth narrative changes. Many growth stocks have lofty valuations as investors think more about what corporations can become rather than what they already are.
A misalignment between expectations and reality can cause quite a stir. However, investors can choose undervalued growth stocks that offer strong financial growth and respectable valuations. These are some of the top undervalued growth stocks to consider.
Deckers Outdoor (DECK)
Deckers Outdoor (NYSE:DECK) is gaining market share in the athletic apparel industry. While heavyweights like Nike (NYSE:NKE) are growing at slower rates, Deckers Outdoor continues to run laps around the competition.
The corporation has several brands under its umbrella, but the two largest ones are Hoka and Ugg. Revenue and earnings growth both came in at healthy rates in the third quarter of fiscal 2024. Sales increased by 16% year-over-year while profits jumped by 40% year-over-year.
The recently added member of the S&P 500 has been on an incredible run over the past five years. The stock is up by more than 500% during that stretch. Momentum has continued based on the stock’s 34% year-to-date gain. Shares have doubled over the past year and have a 32 P/E ratio.
Deckers Outdoor continues to expand its profit margins while gaining market share. The latest quarter featured a 25% net profit margin.
American Express (AXP)
American Express (NYSE:AXP) is a top fintech stock with an impressive dividend program. The firm recently announced a 17% dividend hike. The quarterly dividend now stands at $0.70 per share.
American Express has doubled its dividend since 2018 and looks poised to elevate its dividend for many years. The company aims to report 10% year-over-year revenue growth and an EPS growth rate in the mid-teens each year beyond 2026. American Express fulfilled that goal in the fourth quarter with an 11% year-over-year increase in revenue. Net income jumped by 23% year-over-year in that quarter.
The stock has more than doubled over the past five years and comes with a reasonable 20 P/E ratio. The firm has profit margins in the low double-digits and is poised to raise its margins each year for several years. American Express offers reasonable value and a compelling dividend growth rate for long-term investors. The yield is currently 1.24%. This makes it one of those most undervalued growth stocks to buy in April.
Alphabet (GOOG, GOOGL)
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is arguably the most undervalued member of the Magnificent Seven. The advertising giant trades at a 29 P/E ratio and has been expanding its profit margins thanks to cost-cutting and top-line growth.
The corporation reported 13% year-over-year revenue growth in Q4 2023 as its advertising segment continues to rebound. The 13% growth rate is an acceleration from last year’s 7% year-over-year growth rate.
Alphabet also reported $20.7 billion in net income which is 52% higher than last year’s profits. Google Cloud revenue continues to grow at a faster pace than the company’s advertising network. Cloud revenue reached $9.2 billion, which was 25.6% higher than in the same period last year. Google Cloud had a $186 million net loss in Q4 2022 but turned in $864 million worth of profits in Q4 2023.
Alphabet stock is up by 49% over the past year. It has also gained 158% over the past five years and recently claimed an all-time high. It’s also one of those most undervalued growth stocks to buy in April.
JPMorgan (JPM)
Most investors wouldn’t consider big bank stocks as growth stocks. However, JPMorgan (NYSE:JPM) is an exception. The financial institution has outperformed the S&P 500 with a 53% gain over the past year. JPMorgan has also been up by 89% over the past five years and offers a 2.31% dividend yield.
The corporation regularly posts high-profit margins that hover above 25%. The stock also has a 12 P/E ratio which offers a good margin of safety. JPMorgan reported $9.3 billion in net income in the fourth quarter of 2023. It’s slightly down from last year but still paved the way for a 26% profit margin. Net income would have been $12.1 billion if it weren’t for losses related to the FDIC special assessment and discretionary securities losses. Revenue increased by 11% year-over-year.
Any banking fears can create a good opportunity for JPMorgan. The company swooped in to acquire First Republic as that bank was about to go under, and it could follow suit with other banks. When banks shut down, customers tend to put their money into big banks like JPMorgan to ride the uncertainty.
Synopsys (SNPS)
Synopsys (NASDAQ:SNPS) is a semiconductor company that creates high-performance silicon chips. You can find these chips in machine-learning devices, self-driving cars, computers, appliances, and other resources. The company has been in business for more than 35 years and has annual revenue in excess of $5 billion.
The semiconductor firm trades at a 44 forward P/E ratio and has a $63 billion market cap. The stock is up by 47% over the past year and has soared by 389% over the past five years. Synopsis reported a strong first quarter to start fiscal 2024. Revenue increased by 21% year-over-year while net income surged by 65% year-over-year. The company’s net profit margin reached 27% in the quarter. All in all, it’s one of those most undervalued growth stocks to buy in April.
Synopsys stands to benefit from artificial intelligence tailwinds. Another key catalyst is the company’s upcoming acquisition of Ansys (NASDAQ:ANSS). The acquisition will help Synopsys gain market share and sustain high revenue and earnings growth rates.
Caterpillar (CAT)
Caterpillar (NYSE:CAT) offers an essential service. The company produces construction equipment and has been around for almost 100 years. The corporation has stayed relevant and expanded through various economic cycles, including the Great Depression.
The stock trades at an 18 P/E ratio and offers a 1.43% yield. Shares are up by 59% over the past year and have rallied by 160% over the past five years. Caterpillar has an impressive dividend program and recently hiked its quarterly payout from $1.20 per share to $1.30 per share. That’s an 8.3% year-over-year increase.
Caterpillar recently reported a 13% year-over-year increase in full-year sales. The corporation also returned $7.5 billion to shareholders in 2023 via dividends and stock buybacks. Record sales and adjusted profit per share indicate the stock can continue to gain momentum from current levels.
The stock is rated as a “Moderate Buy” with the highest price target of $395 per share indicating an 8% upside.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) is gushing with cash flow after prioritizing profits in 2023. Net income more than tripled in the fourth quarter of 2023 and prompted the company to issue its first dividend. Revenue growth came in at an impressive 25% year-over-year. That’s an acceleration from the company’s 16% year-over-year revenue growth for all of 2023.
The company has a robust advertising network that continues to attract new users and increase the engagement of existing users. The number of daily active users across Meta Platforms’ social networks increased by 8% year-over-year. Monthly active users were up by 6% year-over-year across all of its platforms.
Businesses can use advanced targeting features to get in front of the right customers. This advantage makes it more difficult for companies to switch from Meta Platforms to another opportunity that can generate similar returns. Meta Platforms trades at a 33 P/E ratio and offers a 0.40% dividend yield. It’s also one of those most undervalued growth stocks to buy in April.
On this date of publication, Marc Guberti held long positions in DECK, GOOG, and SNPS. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
