Growth stocks offer the potential to outperform the stock market. Picking individual growth stocks takes more effort than buying an ETF, but the returns can make it worth it.
One common problem with growth investments is that they attract many investors and end up with high valuations. High P/E ratios and PEG ratios don’t leave much room for error. Some stocks continue to soar despite high valuations thanks to strong financial growth. However, combining financial growth with reasonable valuations is possible if you know where to look. These are three cheap growth stocks to consider.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) trades at a 27 P/E ratio and offers impressive financial growth. The social media firm reported 27% year-over-year revenue growth and 117% year-over-year net income growth in the first quarter of 2024.
The company has continued growing its advertising revenue and social networks while trimming its costs. Meta Platforms decreased its headcount by 10% year-over-year, which meant costs and expenses only increased by 6% year-over-year. This slight increase and high revenue growth resulted in sizable profit margins.
Investors have noticed these developments. The stock is up by 37% year-to-date and has soared by 157% over the past five years. Investors also enjoy quarterly dividend payments since Meta Platforms started to issue them in Q4 2023. The stock’s 0.42% yield is low, but Meta Platforms is poised to raise its dividend in the years ahead meaningfully. The firm is a leading online advertising giant that will continue to attract ad dollars and users’ attention.
Texas Roadhouse (TXRH)
Many restaurant stocks have been soaring on the prospects of becoming the new giants in the industry. Texas Roadhouse (NASDAQ:TXRH) is no exception to the rule. Shares are up by 42% year-to-date and have gained 210% over the past five years. However, the steakhouse chain only trades at a 34 P/E ratio while offering a 1.44% yield.
It’s a solid dividend growth stock that can attract value and growth investors. The firm has maintained an annualized dividend growth rate of 16.05% over the past decade. The company also recently hiked its quarterly dividend from $0.55 to $0.61 per share. That’s a 10.9% year-over-year increase.
Financial growth supports the dividend hikes. Total revenue increased by 12,5% year-over-year in Q1 2024. Meanwhile, net income jumped by 31.0% year-over-year. Texas Roadhouse has 753 restaurants and is expanding its international footprint through franchises. Expansion into multiple markets can fuel revenue and earnings growth for several years.
Deckers Outdoor (DECK)
Deckers Outdoor (NYSE:DECK) is an athletic apparel company with iconic brands like HOKA and UGG under its corporate umbrella. The stock trades at a 32 P/E ratio and is gobbling its rivals’ market share.
The athletic apparel firm reported 16% year-over-year revenue growth to reach a record $1.56 billion in Q3 FY24. This development prompted Deckers Outdoor to raise its fiscal 2024 revenue guidance to approximately $4.15 billion. Revenue wasn’t the only thing that went up. Net income increased by 40% year-over-year in the quarter.
Since its recent inclusion into the S&P 500, more investors have noticed the stock. Shares are up by 33% year-to-date and have rallied by 529% over the past five years. The firm’s high 25.0% net profit margin indicates sustainable growth. The company is also growing in multiple markets. Domestic and international sales were both up by more than 15% year-over-year.
On this date of publication, Marc Guberti held a long position in DECK. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
