3 High-Growth Stocks to Watch in 2021
There’s a lot to like about growth stocks. They can provide a healthy shot in the arm to an otherwise flat portfolio, which makes sense. When a company is growing faster than the market average, its stock price usually isn’t far behind. But to really reap the benefits, high-growth stocks offer the most potential bang for the buck.
So what’s the difference between a regular growth stock and a high-growth stock? The answer is maturity.
Now, there are a lot of ways to pinpoint a growth stock. The classic metric to look for is a high price-to-earnings (P/E) ratio. But most high-growth stocks are still flying under the radar of the average investor. That’s because they’ve got a lot of growing left to do.
Finding a stock that has yet to hit its growth spurt can be like looking for a needle in a haystack. They’re not quite the talk of Wall Street yet. But they’ve got all of the characteristics in place to dominate their respective industries.
Let’s start with a classic. Amazon (Nasdaq: AMZN) has been considered a growth stock for most of its existence. The e-commerce giant started off by going years without turning a profit. Instead of taking the opportunity to excite investors with booming profits, CEO Jeff Bezos reinvested nearly every dime the company made back into it.
It’s proved to be a fruitful move. These days, Amazon controls nearly 50% of all e-commerce. And it got there by focusing on growth. In the meantime, investors that stuck with the company through its heady adolescence have been handsomely rewarded.
Amazon’s P/E ratio stayed above 70 from 2019 to 2021. So investors still believe it will have high earnings growth. But short of attaining world domination, it can’t possibly maintain the growth trajectory it’s currently on.
Growth Stocks Are Good. High-Growth Stocks Are Great
Despite the fact that Amazon is an extremely large blue chip stock, its EPS growth expectations over the next five years sit around 30%. So it’s still a solid investment… if you can afford to get in. Heck, even if you can’t afford a full share, there’s a solid case to be made for investing in Amazon.
But for our purposes, we’re looking for a stock that’s not just in a position to outpace the greater markets… but one that’s also set up to blow the doors off the market average.
And one that’s in a perfect position to do so is Digital Turbine (Nasdaq: APPS).
Better Growth Through Apps
As the company’s ticker suggests, this potential high-growth stock is in the mobile app business. But it’s positioned in a unique way. Digital Turbine acts as a third party that works with wireless carriers to preinstall apps on new cell phones. It then sells available slots to companies like Uber, Spotify and Amazon that want their apps on phones. And business is going well.
Digital Turbine has also developed a strategic partnership with Samsung, the largest cellphone manufacturer in the world. This arms the company with a potent ally in the world of mobile advertising. Digital Turbine also boasts an impressive 197 P/E ratio that could signal significant future growth… at least until the whole cell phone fad dies out. But until that happens, Digital Turbine could be just the propellant a sluggish portfolio needs.
Biobanking at Its Best
The second potential high-growth stock we’re looking at is BioLife Solutions (Nasdaq: BLFS). This company’s been around for a little longer than Digital Turbine. But that just means it’s had more time to perfect what it does.
BioLife is a leader in the medical instrument and supply industry… thanks in no small part to some state-of-the-art developments it’s spearheaded.
Sorry in advance for the 10-dollar words, but BioLife develops, manufactures and supplies:
- Proprietary cell and tissue hypothermic storage
- Cryopreservation freeze media for cells and tissues.
While this might not sound all that important to the average investor, these two developments are huge. This biobanking technology is used in regenerative medicine… It’s essential for medical research… And it plays an essential, supporting role in drug and therapy development.
In other words, when there’s a medical breakthrough, there’s a decent chance that BioLife played a role. And in an age when nobody knows when the next disease will pop up, BioLife Solutions has positioned itself to play a vital role treating it.
BioLife also boasts a strong, innovative leader in its CEO, Michael Rice, and a high P/E ratio of more than 300… making it an enticing high-growth stock.
Cybersecurity is big business. But it’s a pretty crowded field. That’s why a company like FireEye (Nasdaq: FEYE) can easily get looked over by investors. There are, however, plenty of reasons to give this potential high-growth stock a second look.
With year-over-year sales growth of just about 6%, the company seemingly hit a bit of a snag last year. But what’s not accounted for was the company’s massive (and expensive) shift to cloud-based services.
By jumping into the subscription-based model, FireEye has set itself up with a strong baseline of future revenue… And it still has plenty of time to put the pedal to the metal as cybersecurity demands increase.
With a broad array of cybersecurity products for healthcare, government, financial services and personal cloud computing purposes, FireEye’s seasoned leadership is proving to be guiding the company in all of the right directions.
The Bottom Line on High-Growth Stocks
A company on the rise can make a huge difference in any investor’s portfolio. But like all investments, they come with some inherent risk. And because most high-growth stocks don’t offer dividends (though there are exceptions, like these dividend growth stocks), the only way to make money off them is by selling them in the future.
But that’s not the only risk. When it comes to young companies, missing expectations can cause a lot more tumult – both for the business and for the stock price – than it would for a blue chip stock. So before you take the plunge on any investment, it’s important to first come to grips with your risk tolerance.
If you decide that high-growth stocks are right for you, we wish you good investing. If however, you don’t have the stomach for it, there are plenty of other investment opportunities out there.
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About Matthew Makowski
Matthew Makowski is a senior research analyst and writer at Investment U. He has been studying and writing about the markets for 20 years. Equally comfortable identifying value stocks as he is discounts in the crypto markets, Matthew began mining Bitcoin in 2011 and has since honed his focus on the cryptocurrency markets as a whole. He is a graduate of Rutgers University and lives in Colorado with his dog, Dorito.