After the big crash of 2022, growth stocks have staged a gradual recovery. The correction was in-sync with tight monetary policies as central banks globally focused on curbing inflation. However, with a likely shift towards expansionary policies, there is a strong case for global growth acceleration and significant price action in growth stocks.
The following growth stocks represent companies that have strong fundamentals. Further, these companies are likely to witness healthy revenue and EBITDA upside. Considering the growth outlook, valuations look attractive and fresh exposure can be considered at current levels.
The focus is further on companies with growth that’s backed by positive industry tailwinds. However, I must mention that I have included an electric vehicle (EV) stock. While sentiments are bearish for the industry, the valuations are depressed. Therefore, it’s the best time to buy quality EV companies. Let’s talk about the fundamental reasons to be bullish on these quality growth stocks.
Leonardo DRS (DRS)
Global defense spending surged to record highs of $2.44 trillion last year. Considering geopolitical tensions, it’s likely that defense spending will continue to increase. Thus, defense stocks are likely to create value in the next few years. Leonardo DRS (NASDAQ:DRS) is an emerging defense player that looks attractive for multibagger returns.
As an overview, Leonardo is a provider of defense electronic products and systems with a high focus on innovation. The key technology areas for the company includes advance sensing, network computing, force protection, electric power and propulsion.
For Q1 of 2024, Leonardo reported an order backlog of $7.8 billion. Year-over-year (YOY), the company’s backlog increased by 84%. Backed by technological advancement, I expect the order intake to remain robust.
Last month, Leonardo received an order to provide Quantum Cascade Laser (QCL) technology for critical military aircraft protection. In May, the defense player was awarded a contract to build the next-generation aerial refueling operator station for KC-46 Pegasus Tanker fleet. These contracts underscore my view on next-generation technology boosting the company’s order book and growth visibility.
Marathon Digital (MARA)
Marathon Digital (NASDAQ:MARA) is a high-growth stock that’s poised to skyrocket in the coming quarters. The Bitcoin (BTC-USD) miner has aggressive growth plans that’s backed by strong fundamentals. If Bitcoin remains in an uptrend, MARA stock is likely to quadruple sooner than expected.
As of Q1 of 2024, Marathon Digital reported an energized hash rate growth of 142% year-over-year (YOY) to 27.8EH/s. The miner further expects to increase hash rate to 50EH/s by the end of the year. This sets stage for stellar revenue and EBITDA growth even if Bitcoin trades near $60,000 to $70,000 levels.
Notably, the company ended Q1 with a cash buffer (including digital assets) of $1.6 billion. Therefore, there is ample flexibility for aggressive expansion and diversification.
Recently, MARA announced its foray into Kaspa mining. The latter is the fifth largest proof-of-work digital asset by market capitalization. The diversification is a clear indication of Marathon Digital spreading its wings. Overall, MARA stock looks undervalued considering the growth outlook and with strong fundamentals, the stock is poised to skyrocket.
Li Auto (LI)
For investors bullish on the long-term outlook for the EV industry, this is the best time to buy. Sentiments are negative and some of the best EV stocks are trading at a valuation gap. Li Auto (NASDAQ:LI) is likely to be a massive value creator. After a steep correction of 52% for year-to-date, the Chinese EV stock trades at an attractive forward P/E of 16.
LI stock has been impacted by growth deceleration. Further, there are negative sentiments related to tariffs by the European Union on Chinese EVs. However, Li Auto is currently focused on China, so likely international expansion will be in the Middle-East.
From a financial perspective, there are two points to note. First, vehicle margin remained healthy at 19.3% as of Q1 of 2024. Further, Li Auto ended the quarter with a robust cash buffer of $13.7 billion.
Strong fundamentals, launch of new models and investment in technology is likely to ensure healthy growth. Li Auto is targeting 2025 for the launch of level 3 self-driving technology.
On the date of publication, Faisal Humayun 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.
