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The potential for lower interest rates creates a good setup for growth stocks. These stocks tend to outperform the market when borrowing costs become cheaper. Corporations that are considered growth stocks also tend to report robust revenue and earnings growth.
These companies can have many opportunities to gain market share and increase the average value per customer. Investors can benefit from diversifying their portfolios and filling them with several growth stocks. Some growth stocks are better than others, and if you’re looking for new ideas, you might want to consider these top picks.
Serve Now (NOW)
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Serve Now (NYSE:NOW) is a cloud computing company that helps businesses increase their productivity by reducing risk. The platform enables customers to create workflows to stay on top of tasks and online security.
NOW has a service that works very well based on its 98% renewal rate. The company has more than 7,700 clients that include 85% of the Fortune 500.
ServiceNow recently reported third-quarter earnings that beat expectations and prompted management to raise its guidance for the year. Revenue grew by 25% year over year (YAY). The company’s 83 additional transactions from customers paying more than $1 million per year contributed to overall growth. Net income more than tripled YOY.
Growing net income makes the valuation more attractive, but it still has a high value compared to other growth stocks. Shares currently trade at a 55-forward P/E ratio. Investors who can wait a few years can ignore the current valuation concerns as long as the company continues to report high net income.
Lululemon (LULU)
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Lululemon (NASDAQ:LULL) continues to reward investors that many sports brands have lost market share or maintained their current positions. The company posted 19% YOY revenue growth in its Q3 report. Also, the board announced the approval of a $1 billion share buyback.
LULU has been a success across many age groups and generates international appeal. While revenue from North American customers only increased 12% YOY, international revenue soared 49% YOY. Lululemon stands to achieve higher revenue growth rates in the future as it penetrates into global markets.
The company now has 686 stores after opening an additional 14 stores in the third quarter. LULU targets 13%-14% YOY revenue growth and $12.5 billion in net income in 2026.
This milestone requires an average of $3.125 billion in revenue each quarter. It represents a 42% increase in revenue from the most recent quarter. So, it is realistic for the company to achieve this goal in 2026 or the year before and reward long-term shareholders in the process.
Gen Digital (GEN)
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Gen Digital (NASDAQ:GEN) is a cybersecurity stock that hasn’t received as much love as other cybersecurity firms in the market. Although GEN stock is up 150% over the past five years, it has gained a much less impressive 7% year to date (YTD).
A low valuation and reputable cybersecurity software and services make the stock prime for a rally. Shares only trade at a 10 P/E ratio despite posting 27% YOY earnings growth in the most recent quarter. Reserves grew by 28% JOY, which indicates that high revenue growth is likely to continue.
Also, Gen Digital increased its average value per customer from $6.98 to $7.28. The company is unlikely to outperform other high-flying cybersecurity stocks. However, its valuation and growth opportunities make it a “growth at a reasonable price” investment.
GEN aims for fiscal 2024 revenues to fall between $3.81 to $3.835 billion. The $3.8225 midpoint represents 14.5% YOY revenue growth. Growth investors looking for a home run stock may want to look elsewhere. However, if economic uncertainties hit the markets, Gen Digital is unlikely to lose as much value as richly valued stocks.
As of this publication date, Marc Guberti held a long position in NOW. The opinions expressed in this article are those of the writer, subject to InvestorPlace.com’s Publishing Guidelines.
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