The past year has not been easy for investors looking for multibagger high-growth stocks.
Following a rip-roaring 2021, stocks with high growth rates and high multiples are seeing valuations compressed. This has been due to a combination of surging interest rates and expectations about weaker growth on the horizon.
That said, outside of various macro headwinds, there’s a lot to like about certain high-growth stocks. Companies that have shown the ability to sustain higher growth rates over time have tended to perform well, in any environment.
Thus, investors looking for solid risk-reward bets in this environment may see better portfolio performance by investing in such stocks at more depressed valuations.
Of course, that’s not taking anything away from the myriad concerns hampering such stocks. We could be due for a bumpy ride over the next few months. That said, those taking a multi-year view may want to consider these three stocks. I think these multibagger high-growth stocks have the potential to outperform by 2025.
Occidental Petroleum (OXY)
A top pick of none other than Warren Buffett, Occidental Petroleum (NYSE:OXY) is an obvious choice for defensive investors looking for multibagger high-growth stocks right now.
Not normally considered a growth stock, this oil company has shown significant strength of late. Most OXY’s earnings and cash flow growth is a derivative of higher oil prices. That said, this integrated energy producer has also executed extremely well, and is among the best capital allocators in this sector.
Indeed, there are plenty of reasons why Buffett has continued to add to his position in OXY stock over the past year. For those looking for value (price-to-earnings ratio of around 5x) and growth (return on equity of nearly 60%), this is a stock to consider.
This is a company that also has provided strong earnings, which included net margins of more than 35%. Given where oil prices are today, even if we are to see a dip from here, Occidental clearly has the room to maintain profitability, adjusting capital spending to meet targets, if necessary.
Target Hospitality (TH)
Target Hospitality (NASDAQ:TH) is a star performer in the Specialty Business Services industry that has posted an impressive return on equity.
In the hospitality industry, the ROE metric is very important. Accordingly, sector-beating returns in this regard, as well as a debt-to-earnings ratio that appears manageable at around 2.29, make this a compelling option for long-term investors.
This isn’t a high-growth stock from a top-line perspective, by any means. That said, the company’s bottom line growth is what will be closely watched moving forward.
Trading at around 35 times trailing earnings, it’s clear that plenty of earnings growth is expected next year. If Target Hospitality is able to beat expectations, this is one of the multibagger high-growth stocks with significant upside from here.
Marathon Oil (MRO)
Another top oil company to make this list of multibagger high-growth stocks, Marathon Oil (NYSE:MRO) is yet another way I think long-term investors can gain the growth profile they’re looking for in this difficult market.
Like Occidental, Marathon’s recent earnings results have been absolutely remarkable. The company beat analyst expectations by a wide margin, allowing the company to pay out roughly 80% of its operating cash flow for the quarter to investors.
The company did have to increase its guidance for capital expenditures from $1.3 billion to $1.4 billion for the year. However, this stock currently trades at a better valuation than approximately 80% of its peers.
Thus, for value investors looking for exposure to this space, there’s plenty of upside potential in the short-, medium- and long-term to be had. This is a company that could have around 30% upside, should analyst targets be correct.
On the date of publication, Chris MacDonald did not have (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.