Finding stocks that can 10X this year is certainly easier said than done. However, there are growth stocks in the market with the potential for such returns, if everything lines up perfectly. Of course, most people looking for such gains usually end up investing in cryptocurrencies or in loss-making and highly dilutive stocks in the hopes of landing a short squeeze.
However, I think it is a better idea to invest in sustainable businesses that are at or near profitability already and are supported by robust growth. These stocks don’t trade at bargain valuations, but they have lots of upside potential as their valuations are lower than their peers.
Here are three such growth stocks to consider for outsized gains this year.
GigaCloud Technology (GCT)
GigaCloud Technology (NASDAQ:GCT) operates an e-commerce marketplace for large parcel merchandise. Despite its name, this company has nothing to do with cloud computing. But don’t let that fool you – GigaCloud is absolutely thriving. The company recently reported revenue that nearly doubled year-over-year in Q1 to $251 million. Unsurprisingly, GCT stock has already soared 380% over the past year, but I believe there’s plenty more room for this growth gem to run.
While a 10x from here might be a stretch, the company’s growth metrics are undeniably impressive. Analysts expect 61% revenue growth this year and earnings to surge 50% over the next two years. GigaCloud is firing on all cylinders, launching new services like “Branding-as-a-Service” to help marketplace sellers boost their competitiveness. The company is also expanding their supplier base into new markets like Columbia, Mexico, and Turkey.
In my view, this level of growth deserves a much richer valuation premium. As GigaCloud’s marketplace network effects continue widening, I expect the stock to keep climbing steadily higher well into 2025 and beyond.
Urban-gro (UGRO)
Urban-gro (NASDAQ:UGRO) designs and builds controlled environment agriculture facilities. While UGRO stock has plummeted over 90% over the past five years, the company’s improving fundamentals could catalyze a rebound in the coming quarters.
In the company’s first quarter, Urban-gro delivered its strongest quarterly adjusted EBITDA results in two years, driven by diversified revenue streams and reduced operating expenses. The company’s backlog also remained solid at $99 million.
Most notably, the DEA’s support for rescheduling cannabis to the less stringent Schedule III classification could be a game-changer. With over 1,000 cannabis projects completed, urban-gro is well-positioned to capitalize on the industry’s potential reinvigoration.
The stock trades at just one-fifth of forward sales, despite expectations for revenue to nearly triple over the next five years. I believe any positive regulatory developments in this election year could send UGRO stock soaring. Analysts are also very optimistic here.
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However, investors must remain cautious given the stock’s extreme volatility. While a repeat of 2021’s 1,100% spike seems unlikely, the risk-reward upside for this stock appears favorable right now.
Integral Ad Science Holding (IAS)
Integral Ad Science (NASDAQ:IAS) provides digital ad verification and optimization solutions to ensure real people see ads. In today’s AI-driven world, it’s becoming increasingly difficult to distinguish between real viewers and bots, making IAS’s services more critical than ever. Moreover, with the rise of apps that incentivize users to participate in digital surveys, there’s a growing need for companies to optimize ad placement for maximum viewability and revenue.
IAS recently reported strong Q1 results, with revenue growing 8% to $114.5 million and adjusted EBITDA coming in at $33.1 million. The company benefited from increased advertiser demand, particularly in the social media segment. While not yet profitable, IAS is expected to turn solidly profitable this year with 401% earnings per share growth to 20 cents, eventually quadrupling this number to 80 cents by 2028.
Although the stock already trades at a premium, I believe IAS has significant long-term growth potential. Digital advertising is becoming increasingly important, and IAS’s AI-backed technology and partnerships with major platforms like TikTok, X, and Snap (NYSE:SNAP) position it well to capitalize on this trend. While a 10x return by December seems unlikely without a massive contract win, I believe IAS could deliver multibagger gains in the coming years for patient investors.
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It is more realistic the stock could return to GuruFocus’ “fair price” range, but I do think 10X upside is possible.
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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.
