7 Growth Stocks to Buy to Outperform the Nasdaq Index
As investors, we all aim to outperform the market. But beating the S&P 500 is a difficult task for most of us. Outperforming the Nasdaq Index has proven to be an even greater challenge in recent years. That’s because this tech-heavy index has been on a tear over the past two decades, buoyed by high-growth companies generating some impressive returns. However, most of the Nasdaq’s meteoric rise has come from just a handful of stellar growth stocks.
By identifying and investing in such quality growth stocks for the long-haul, you stand a good chance of earning higher returns than the Nasdaq. Great businesses rarely disappoint when given enough time, and many of the companies on this list have decades of growth behind them to propel their future ascent.
Thus, it pays to focus on quality. As legendary investor Philip Fisher said, “The stock market is filled with individuals who know the price of everything, but the value of nothing.” By buying great growth companies at reasonable valuations, holding them for the long-term, and allowing their earnings growth to compound over time, you stand a good chance of beating the Nasdaq.
Let’s take a look at the top growth stocks I think are worth buying right now!
MercadoLibre (MELI)
MercadoLibre (NASDAQ:MELI) is quickly becoming the Amazon (NASDAQ:AMZN) of Latin America, if it isn’t already. That’s one of the key reasons I remain bullish on MercadoLibre for the long-run.
This company has immense potential given the still underpenetrated e-commerce and digital payments markets across Latin America. As internet access and smartphone penetration continue improving across the region, MercadoLibre stands to benefit. Its e-commerce platform is already the dominant option in this region, and its Mercado Pago digital payments system is gaining tremendous traction as well.
Recent growth estimates illustrate the vast runway ahead. MercadoLibre is expected to expand margins rapidly this decade, with earnings per share expected to climb from $33 in 2024 to $226 in 2033. This is alongside revenue climbing from $18 billion to $72 billion over the same timeframe. If Latin American economies grow better than expected, we could see even higher growth.
Specifically, I’m keeping an eye on Argentina’s potential over the next decade. If President Javier Milei’s free-market economic reforms manage to unleash growth in the country, MercadoLibre stands to be a major beneficiary. While risks certainly exist, the company’s upside potential is too significant to ignore.
Moreover, the stock itself has pulled back a little from the $1,800 range to the $1,500 range recently. This looks like a solid buying opportunity for long-term investors. MercadoLibre still trades at a premium valuation, but remains one of the top growth stocks to own for emerging market exposure over the next decade.
FTAI Aviation (FTAI)
This is one of the growth stocks I have written about quite a lot recently, and it is hard to ignore such a quality business. The private aviation industry has seen a lot of growth, especially after Trump’s tax cuts made it possible for people to write off private jet expenses as business expenses. FTAI Aviation (NASDAQ:FTAI) specializes in CFM56 engines, which are used a lot more by commercial planes, but also in the commercial aviation sector as well.
While risks exist in the near-term, I remain bullish on FTAI stock over the long run due to the company’s dominant market position and the aforementioned secular tailwinds for private aviation. FTAI owns and leases commercial aircraft engines, with a specialty in CFM56 engines used widely by airliners and private jet operators. With brisk air travel demand globally, FTAI is well-positioned to capitalize on the growing demand for engines and maintenance services.
Notably, FTAI stock is up 144% in the past year, and while I think it could have a correction in the near-term, the long-term upside potential with this stock seems solid. FTAI is expected to grow its earnings from $2 per share in 2024 to $6 per share in 2027. Paying 34-times forward earnings for that sort of growth is still cheap in my view for this kind of quality business.
The company’s margins are also very impressive already. FTAI’s net margin of 38% in Q4 is easily better than 95%-plus business services companies. That net margin was 21% for all of 2023, so I think continued margin expansion can continue.
As a sweetener, FTAI also provides a dividend yield of 1.8% currently. The payout is still low relative to the company’s earnings, so dividend growth should be robust over the coming years.
Gambling.com (GAMB)
Gambling.com (NASDAQ:GAMB) does exactly as the name suggests. The company’s focus is on online casinos, online sports betting, and the fantasy sports industry. The company also engages in digital marketing for other gambling and sports betting companies. These sorts of companies have been doing very well recently as sports betting explodes in popularity.
I’m bullish on Gambling.com due to the immense growth in online sports betting and gambling across the U.S., with more states legalizing online betting. It’s estimated that roughly 39% of Americans bet on sports, and 15% say they know someone with a related gambling problem. Over 80 percent of American adults gamble on a yearly basis. This is a huge market, and it is opening up even more due to strong lobbying by gambling companies across the U.S.
These tailwinds explain why Gambling.com has been executing so well lately. It has a 3-year average annual revenue growth rate of over 50%, which is better than 93% of its industry peers. I expect the robust growth to continue. Gambling.com is looking at revenue increasing from $131 million in 2024 to $197 million in 2027, per analyst estimates.
While analysts agree that the company’s earnings growth outlook is more muted, I believe the potential is there for significant bottom-line expansion as well if the company can continue gaining share in this booming industry.
ATRenew (RERE)
ATRenew (NYSE:RERE) operates a leading technology-driven pre-owned consumer electronics transactions and services platform in China under the brand ATRenew. This firm primarily sells mobile phones, laptops, tablets, drones, digital cameras, household products, and bags through online platforms and offline stores.
I remain optimistic about ATRenew, despite the broader challenges facing the Chinese economy. Growth has slowed in China after the pandemic recovery, especially for tech companies dealing with deflation and soft consumer spending. However, I believe Chinese companies could be poised for a resurgence as the country’s monetary policy stance becomes more accommodative.
ATRenew itself looks attractively valued here. It trades at just 5-times forward earnings currently, which seems far too cheap given the company’s growth profile. ATRenew is expected to grow earnings by 90% in 2024 and another 54% in 2025, with revenue growth above 25% per year. This type of rapid growth typically warrants a much higher multiple.
The company’s balance sheet also appears healthy, with $337 million in cash against only $52 million of debt. There are no glaring financial risks that stand out.
Given the stock’s rock-bottom valuation and impressive growth metrics, I see significant upside potential in ATRenew. The company is executing well despite broader economic headwinds in China. As macro conditions eventually improve, ATRenew looks poised to reward investors handsomely.
Opthea (OPT)
Opthea (NASDAQ:OPT) is a more high-risk, high-reward biotech bet to consider, since the company has not generated revenue yet. It is a clinical-stage biopharmaceutical company dedicated to developing and commercializing therapies primarily for eye diseases. Opthea’s focus lies in addressing the unmet needs of patients with highly-prevalent and progressive retinal conditions, including wet age-related macular degeneration (wet AMD) and diabetic macular edema (DME).
I don’t often discuss biotech stocks, but Opthea intrigues me as a potential high-growth opportunity if its drug development goes as planned. The company is based in Australia, and focuses on the large global market for retinal disease treatments.
According to estimates, if Opthea delivers on expectations, the stock could trade around just 2.6-times 2028 earnings. Sales could potentially soar from $5.7 million in 2024 to $2.4 billion in 2033 if its pipeline successfully materializes. While clinical failures always pose a risk, the upside scenario for this stock makes this a worthwhile speculative bet.
With $157 million in cash, Opthea also has a decent runway to continue funding its research and development until profitability is achieved. The risk-reward profile looks favorable for investors willing to take on some volatility with this name.
Li Auto (LI)
Li Auto (NASDAQ:LI) has been an outstanding electric vehicle startup in my view. As I’ve noted many times before, most EV startups have been bleeding cash at an alarming rate. Li Auto stands out as a rare profitable EV maker with stellar top-line growth.
Now, LI stock did recently stumble after the company cut its Q1 delivery guidance by 24%. However, even with this lower forecast, Li Auto will likely beat expectations. In March alone, the company delivered 28,984 vehicles, up 39.2% year-over-year. This recent slower pace of deliveries resulted from inventory shortages during the Chinese New Year. For the full first quarter, Li Auto still projects rapid growth, relative to any other automaker.
Despite strong operational metrics, LI stock trades at just 16-times forward earnings and 1.1-times forward sales. That seems remarkably inexpensive compared to money-losing EV startups with questionable outlooks.
In my view, the company’s recent guidance cut appears to be just a temporary speed bump. With brisk demand in China, Li Auto looks poised to continue gaining market share and rewarding shareholders.
D-Market (HEPS)
D-Market (NASDAQ:HEPS) is a Turkish e-commerce company that has been trading sideways around $1-$2 per share for nearly two years now. However, I think there is a strong possibility of a breakout as the company’s financial performance improves.
Admittedly, Turkey’s shaky macroeconomic situation does warrant caution with this name. Turkey has struggled to get inflation under control even with aggressive rate hikes, and inflation remains elevated.
However, even with high interest rates and inflation headwinds, D-Market is expected to grow at a brisk pace. The company’s earnings are projected to more than double from 3 cents to 7 cents, along with around 30% annual revenue growth. This kind of growth trajectory typically warrants a much higher valuation.
If Turkey can eventually get inflation trending lower and stabilize its economy, D-Market could potentially generate multi-bagger returns from current levels. The company’s growth outlook remains healthy, despite the challenging operating environment. While not without risks, I believe D-Market has breakout potential if the company’s management team continues to execute well.
On the date of publication, Omor Ibne Ehsan 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.
