3 Overlooked Growth Stocks to Buy for Jaw-Dropping Returns
There are thousands of stocks listed on the main exchanges. It’s not always possible for investors to spot all potential multibagger opportunities. However, there are instances where high-quality stocks are overlooked or ignored by the markets. These growth stocks should be grabbed with both hands.
The reason is when stocks are in the limelight, they are generally overvalued. Of course, market overreactions provide entry opportunities. However, overlooked stocks, in most cases, are trading at a valuation gap. When the spotlight shifts to these stocks, the rally can be ferocious.
This column focuses on three undervalued growth stocks that are overlooked. These stocks represent quality companies on a healthy growth trajectory or poised to accelerate growth in the coming years. In my view, these stocks can provide multibagger returns in the next 24 to 36 months.
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Let’s discuss the catalysts for a big impending rally in these growth stocks.
Miniso Group (MNSO)
Source: shutterstock.com/Hendrick Wu
There is a lot of skepticism related to owning Chinese stocks and that has translated into some good buying opportunities. Miniso (NYSE:MNSO) has remained sideways, amidst volatility, in the last 12 months. I believe that MNSO stock looks attractive at a forward price-earnings ratio of 17. Considering the growth trajectory, I am bullish on multibagger returns from current levels.
As an overview, Miniso is a lifestyle retailer with a global presence. The company’s differentiating factor is attractive pricing and a dynamic product portfolio with the regular addition of new SKUs. For Q2 2024, Miniso reported stellar revenue growth of 54% on a year-on-year basis to $541 million. For the same period, the company’s adjusted EBITDA margin expanded by 200 basis points to 25.9%.
It’s also worth noting that Miniso has opened 973 new stores on a year-on-year basis. At the end of Q2 2024, the company had 6,413 stores globally. Aggressive new store openings are likely to ensure robust revenue growth. Further, with supply chain optimization and a favorable product mix, EBITDA margin expansion is likely to sustain.
Leonardo DRS (DRS)
Source: Shutterstock
Leonardo DRS (NASDAQ:DRS) is another stock that deserves attention and can be a multibagger from current levels. DRS stock trades at a forward price-earnings ratio of 27.3, and valuations look attractive, considering the industry potential.
As an overview, Leonardo DRS is an emerging player in the defense industry. The company provides defense electronic products and systems. With rising geopolitical tensions, I expect global defense spending to continue trending higher. That will translate into healthy growth in order backlog for the company.
Leonardo DRS was listed in November 2022 after the merger with Rada Electronic. Since listing, the company’s order backlog has swelled by 2.5x to current levels of $7.8 billion. Backed by innovation, I believe the order intake will remain robust. That ensures clear revenue and cash flow visibility.
I must add that Leonardo has a strong balance sheet. This is important to mention, as the company is targeting to execute bolt-on merger and acquisition transactions. Besides the backlog growth, that is another catalyst for revenue upside.
IAMGOLD (IAG)
Source: Alexander Limbach / Shutterstock
Let’s also talk about a penny growth stock that looks significantly undervalued. IAMGOLD (NYSE:IAG) stock has trended higher by nearly 30% in the last 12 months. However, considering the recent upside in gold and the company’s production upside potential, I believe IAG stock will likely trade in double digits in the next 24 months.
Being a penny stock, the first point to note is fundamentals. IAMGOLD ended 2023 with a total liquidity buffer of $754.1 million. That provides flexibility for investment in expansion projects.
However, the biggest catalyst for the company in 2024 is the commencement of production from Cote Gold assets. It’s among the largest gold mines in Canada, with a mine life through 2041.
For the current year, IAMGOLD expects a production of 255,000 ounces at the midpoint from the asset. Therefore, the company will benefit from a production bump-up coupled with a higher realized gold price. As cash flows swell, IAG stock is likely to surge higher.
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.
Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.
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