Companies with healthy revenue and EBITDA growth visibility team with strong fundamentals
When growth stocks shine in the limelight, they rarely trade at a valuation gap.
Investors continue to buy in an uptrend on the fear of missing out on a potentially bigger rally. However, a value investor will agree that it’s best to avoid stocks that are too much in the limelight.
In an ocean of stocks, it’s not surprising if some great ideas are overlooked by the markets. However, it’s unlikely that quality stocks will remain undervalued for an extended period. When the trend reversal comes, the upside can be sharp.
And even with recent inflation numbers, it’s likely that the first-rate cut will come in 2024. Expansionary monetary policies are good for high-beta stocks. Therefore, it’s time to accumulate growth stocks that have been overlooked.
Let’s discuss the reasons to be bullish on these growth stock ideas.
Miniso Group (MNSO)
Source: shutterstock.com/Hendrick Wu
First, Miniso Group (NYSE:MNSO) has trended higher by 25% in the last 12 months. However, the stock deserves to trade at higher valuations considering the growth trajectory. I expect a bigger rally in the coming quarters with the stock trading at a forward price-earnings ratio of 17.3.
As an overview, Miniso is a lifestyle retailer with strong presence in China and expanding global presence. The company differentiates itself through a dynamic product portfolio that’s offered at an attractive pricing.
For Q2 2024, Miniso reported revenue growth of 54% on a year-over-year (YOY) to $541 million. For the same comparable period, adjusted EBITDA margin was 200 basis points higher at 25.9%. Therefore, stellar growth has been associated with margin expansion and cash flow upside.
Furthermore, Miniso ended 2023 with a store count of 6,413. So, the number of stores increased by 973 YOY. MNSO targets to open 1,000 stores each year between 2024 and 2028, which is likely to ensure robust revenue growth.
Leonardo DRS (DRS)
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Another quality growth stock that’s likely to be a value creator is Leonardo DRS (NASDAQ:DRS). Providing defense electronic products and systems, its concentrated areas include advance sensing, network computing, force protection and electric power & propulsion.
The stock has been trending upward, with a rally of 40% in the last 12 months. However, with focus on the defense sector, expect healthy growth for this attractively valued stock.
Notably, Leonardo DRS owns a strong order backlog of $7.8 billion. This provides clear revenue visibility. Since November 2022, the company’s order backlog has swelled by 2.5x. With geopolitical tensions and focus on defense technology, order intake may remain robust.
Also, Leonardo DRS is significantly investing in research and development. Recently, the company received an award for its “cooled infrared sensor that unlocks the ability for advanced military and scientific capabilities across multiple domains.”
Borr Drilling (BORR)
Source: Oil and Gas Photographer / Shutterstock.com
Investors will want to consider Borr Drilling (NYSE:BORR) before it surges higher. BORR has declined by 23% in the last 12 months and trades at a forward price-earnings ratio of 8.4. Further, the stock offers a dividend yield of 1.72%, which are likely sustainable.
The provider of offshore drilling services, the company reported a strong order backlog of $1.75 billion as of December 2023. With oil trending higher, expect order intake to remain healthy. Recently, BORR announced contracts for its premium jack-up rigs totaling $158 million.
Additionally, Borr Drilling reports adjusted EBITDA of $351 million for 2023. For the current year, the company has guided for adjusted EBITDA of $525 million. Therefore, healthy revenue and EBITDA growth is likely in coming quarters coupled with margin expansion. This is likely to ensure that BORR stock trends higher from undervalued levels.
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.
