We all want to find those elusive hypergrowth stocks that can deliver eye-popping returns year after year. Who wouldn’t love doubling their money on an annual basis? While that kind of performance is rare, some hypergrowth stocks do offer that tantalizing potential. These fast-growing companies can quickly become multibaggers for investors with the patience and foresight to get in early.
In my experience, the key to identifying hypergrowth stocks is finding companies that are experiencing surging top-line growth, while also expanding their profit margins over time. It’s a powerful combination that turns small enterprises into Wall Street darlings seemingly overnight. The key is snapping these stocks up before the rest of the market catches on to their potential.
I believe now is an ideal time to go hunting for hypergrowth stocks. With interest rates poised to drop and unemployment remaining low, the economic backdrop looks favorable for rapid growth with many of these names. Many disruptive companies should be able to capitalize on strong tailwinds to see outsized growth.
With that said, let’s take a look at these three unique hypergrowth stocks!
Luckin Coffee (LKNCY)
Luckin Coffee (OTCMKTS:LKNCY) is basically trying to become China’s “Starbucks (NASDAQ:SBUX).” Now, before you dismiss Luckin as just another Chinese company, hear me out. Many of the biggest Chinese firms have struggled to maintain their growth momentum, but smaller startups in promising industries are thriving. Luckin Coffee is one such gem, boasting stellar financials and a dirt-cheap valuation.
In Q4 2023, the company delivered a staggering $1 billion in revenue, up an impressive 91% year-over-year. For the full year 2023, total revenue soared to $3.5 billion, an 87% year-over-year increase. Now, here’s the kicker: even with a modest net margin of 4.2%, Luckin Coffee generates a respectable $1.28 in earnings per share, and trades at a measly price-to-earnings ratio of 20-times. Talk about value!
But that’s not all. With significant room for margin expansion and top-line growth, this company is poised for greatness. China is pulling out all the stops to reignite growth through rate cuts and stimulus measures, which could further propel Luckin Coffee’s growth trajectory.
Analysts expect the company’s earnings per share to surge to $2.30 in 2024, meaning you’re paying a paltry 11-times forward earnings for this stock. And get this – revenue is projected to soar to a whopping $6.1 billion in 2024. If these expectations are met, multi-bagger returns are well within reach.
Soitec (SLOIY)
Soitec (OTCMKTS:SLOIY) is a semiconductor wafer company based in France, and is one I’d certainly consider an overlooked company in this space. Unlike its more celebrated peers, this semiconductor gem has garnered little mainstream attention, presenting a golden opportunity to snatch this stock up before it soars.
Despite being down nearly 50% from its 2021 peak, I believe Soitec is unlikely to plunge much further, and a reversal could be imminent. This company designs and manufactures semiconductor materials used in a wide range of devices, from smartphones and computers to cars and medical equipment.
Its products include Fully Depleted Silicon-On-Insulator (FD-SOI) for automotive radar and processors, as well as PD-SOI and FinFET-SOI for high-performance computing markets. Soitec also offers RF-SOI substrates for 4G LTE and 5G smartphones, making it a key player in the ever-evolving tech landscape.
While analysts anticipate a slight dip in revenue from $1.3 billion in 2023 to $1 billion in 2024, the company’s long-term outlook is promising. Analyst projections suggest nearly $2 billion in revenue is likely by 2027, presenting ample room for growth. Moreover, with a forward price-to-earnings ratio of just 21-times and the potential for margin expansion as the company’s top line grows, Soitec’s value proposition is hard to ignore.
Adding to its appeal, Soitec boasts a robust balance sheet, with $707 million in cash offsetting $720 million in debt. This positions the company well for a recovery akin to Lasertec (OTCMKTS:LSRCY), which has surged nearly 80% since I first covered it last year.
SelectQuote (SLQT)
SelectQuote (NYSE:SLQT) is an insurance sales agency that helps customers find the best rates on life, auto, and home insurance policies. Lately, this company has been, shall we say, on a rather bumpy ride. Like many high-growth startups, its stock was decimated from mid-2021 to mid-2022, trading sideways around $1-$2 per share since September 2022. However, I believe SelectQuote is poised for a breakout as its financials improve.
In Q4, the company’s revenue surged 27% to $405 million, beating analyst estimates by a whopping 7.7%. Yet, the stock remains range-bound, likely due to concerns over its $724 million debt load and a mere $22 million in cash.
However, SelectQuote is aggressively cutting losses, with its losses expected to shrink by 43% in 2024 and a further 63% in 2025, before reaching profitability in 2026.
Couple this with the upcoming rate cuts, which should significantly improve the company’s debt profile and allow it to generate even higher profits by reducing interest expenses, and you get a potential big-time winner. While some investors may remain wary, it’s worth noting that dilution has been relatively low, with shares outstanding increasing by only around 2% year-over-year.
If SelectQuote weathers the storm and continues beating top-line estimates, holding SLQT stock until the company reaches profitability could yield multi-bagger upside. Currently trading at a mere 0.24-times forward sales and with 26% top-line growth expected for 2024, this potential upside is simply too hard to ignore.
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.