Many investors know about the Magnificent Seven stocks. If you haven’t heard of that phrase before, you will still recognize the stocks within that cohort. Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL) and Nvidia (NASDAQ:NVDA) are three of the Magnificent Seven stocks, ranked by current market cap.
Most ETFs have large positions in these stocks, especially the ones that track broader indices. However, some growth gems aren’t as obvious. These picks are relatively overlooked but look ready to outperform most, if not all, of the Magnificent Seven stocks in the years ahead.
E.l.f. Beauty (ELF)
E.l.f. Beauty (NYSE:ELF) recently reported its 21st consecutive quarter of sales growth. The company also gained market share in the beauty industry for the 5th consecutive year while delivering more than $1 billion in net sales in fiscal 2024.
The company ended on a strong note with 71% year-over-year (YOY) revenue growth in Q4 FY24. Investors initially got spooked by this report, since e.l.f. Beauty offered modest guidance that called for a 20% to 22% YOY net sales increase in fiscal 2025.
While this represents a meaningful drop, e.l.f. Beauty has always been conservative in its guidance. The company raised its guidance multiple times in fiscal 2024 and initially projected similar results for that year. Instead of seeing revenue growth in the mid-twenties, investors got to enjoy 77% YOY net sales growth in fiscal 2024.
The company’s shares are up 29% year-to-date and have surged nearly 1,700% over the past five years. The stock currently has a $10.2 billion market cap and may be added to the S&P 500 within 1 to 3 years.
Sezzle (SEZL)
Sezzle (NASDAQ:SEZL) is a “buy now pay later” platform that trades at a 34 P/E ratio and has a market cap of $460 million. Most people haven’t heard of this stock, yet it has more than tripled year-to-date. The P/E ratio combined with strong financials have made the rally sustainable.
Revenue increased by 35.5% YOY in Q1 2024. GAAP net income was up by an astonishing 364% YOY. The company’s total subscribers surged from 142,000 members in Q1 2023 to 371,000 members in Q1 2024. Sezzle also reported a 45.9% YOY increase in the number of transactions, demonstrating more frequent purchases from its members.
Sezzle isn’t receiving as much attention as other investors. Analysts aren’t rushing to assign price targets for this up-and-coming fintech firm. More than half of the company’s shares are currently owned by insiders. Leadership has a lot of skin in the game, which is good to see.
SoFi (SOFI)
SoFi (NASDAQ:SOFI) is another fintech firm worth monitoring. The stock has been on a roller coaster, which includes a 28% year-to-date decline, but the stock’s recent results don’t match up with the company’s earnings report.
While the stock’s recent price movement may have investors think otherwise, SoFi reported solid results. Revenue increased by 37% YOY in the first quarter of 2024. Net income was also solid. The company went from a GAAP loss of $44.4 million in Q1 2023 to $77.9 million GAAP profitability this quarter.
SoFi offers many financial products that should keep retention high. It has loans, brokerage accounts, bank accounts, credit cards and other resources. SoFi can also offer more competitive rates since it is a digital bank with less overhead than traditional banks.
Leadership’s multi-year plan suggests earnings and revenue should continue to march higher. The stock price should go up along with the company’s financials.
On this date of publication, Marc Guberti held long positions in ELF, SEZL and SOFI. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
