Investors looking for the best stocks to invest in right now often look first to the price-to-earnings (P/E) ratio to find reasonably-priced stocks. And while that might lead to a reasonably-priced stock, that offers no visibility on growth.
The goal of investing is profit. With profit in mind, investors often need this catalyst to push their stocks higher. While growth should not be considered an end all, be all metric, it can serve as a predictor of higher stock prices.
Most investors who think high growth think Amazon (NASDAQ:AMZN). However, when it comes to earnings per share (EPS) growth both this year and next year, Amazon does not even rank close to the top 100. Often, such high-growth stocks do not appear on any list of the most frequently-watched stocks. However, a few of these equities also post positive EPS numbers and expect to see massive growth for this year, next year, and on average, for the five years moving forward.
Given both expected profit growth and valuations, these equities could serve as the best stocks to invest in right now:
Best Stocks to Invest In: Jagged Peak Energy Inc (JAG)
2018 Growth: 100.00%
2019 Growth: 61.5%
Expected 5-Year Growth Rate: 76.4%
Jagged Peak Energy (NYSE:JAG) is a Denver-based exploration & production (E&P) oil company. Most of its activity takes place in the southern Delaware basin in Far West Texas. It derives most of its revenue from the oil and gas found in this region.
Although the company has existed for about 35 years, the history of JAG stock only goes back to January 2017. It trades slightly below its IPO price at this time. However, the profit growth could indicate the stock is ready to move higher. Analysts expect profits for 2018 to come in at 27 cents per share.
However, by 2019, they expect net income to come in at 76 cents per share. They predict further growth in 2020 with profits reaching $1.06 per share. At 130 times current earnings, it appears expensive from a P/E standpoint. Still, that P/E would fall to the low-single-digits if today’s price holds until 2020.
Also, JAG remains one of the few E&P firms not to see revenue fall in 2015 and 2016. In fact, revenues more than doubled in each of those years, and they tripled in 2017. Even though revenue growth will fall below 100% in 2019, it will remain impressive assuming the projected 31.5% growth rate can hold.
Since JAG stock has not yet become a mature stock, investors may remain skittish. However, with oil and gas prices more likely to rise than fall in today’s market, JAG stock should stay in a high-growth mode for years to come.
Best Stocks to Invest In: Devon Energy (DVN)
Source: Lane Pearman Via Flickr
2018 Growth: 188.3%
2019 Growth: 54.3%
Expected 5-Year Growth Rate: 74.7%
E&P stocks have become some of the best stocks to invest in right now, and Oklahoma City-based Devon Energy (NYSE:DVN) is not an exception. As one of the largest E&P firms in the country, Devon suffered in the wake of the recent oil-price slump. However, with energy prices back on the rebound, so too is Devon’s earnings growth and DVN stock itself.
The company has recovered from the staggering losses it suffered in both 2015 and 2016. Devon earned $1.71 per share in 2017. By 2020, analysts expect earnings to climb to $4.21 per share. This would take the company past 2014 earnings levels when Devon earned $3.91 per share at the height of the last oil boom.
Moreover, despite the recent heavy losses, DVN stock maintained a healthy balance sheet. Asset sales and some debt increases covered the losses. Today, debt levels have fallen, and stockholders’ equity has rebounded to about $8.9 billion. With a market cap of $22.9 billion, the stock trades at just over 2.5 times its book value.
Although the DVN stock price has doubled from its 2016 lows, time remains to benefit from Devon’s rebound. The stock trades at about $43 per share, almost 50% below its high of $80.63 per share in 2014. Assuming projected profits hold, the stock could easily exceed that high before this current in oil prices is said and done.
Best Stocks to Invest In: Century Aluminum (CENX)
2018 Growth: 117.7%
2019 Growth: 154%
Expected 5-Year Growth Rate: 70.7%
Century Aluminum (NASDAQ:CENX) stands as another company rebounding strongly from mid-decade losses. Now, the Chicago-based producer of aluminum and value-added aluminum products has again positioned itself for high growth. As the second-largest producer of aluminum after Alcoa (NYSE:AA), it stands to benefit as it restarts idled capacity amid the 10% tariff on aluminum imports imposed by the Trump Administration.
The increased production at home could lead to more consistency. In the recent past, CENX has been plagued by erratic revenue and earnings performance. Seeing the company alternate between annual losses and profits has become common. Fortunately, analysts now see a more consistent string of profits and profit growth that can make it one of the best stocks to invest in right now. Net profit came in at 51 cents per share in 2017. Looking ahead, analysts predict 82 cents per share in earnings for this year and $2.12 per share the next.
Assuming these numbers hold, CENX stock would trade at a 19 P/E based on 2018 forward earnings. However, 2019’s expected earnings could take that multiple to just above 7. CENX stock has seen an average P/E of 22.34 over the last five years. Earnings of $2.12 combined with a P/E of 22.34 would take CENX to over $47 per share by the end of next year. Such a move would triple the value of the stock from today’s levels.
With stock price growth taking off and the domestic aluminum industry recovering, CENX stock stands in a strong position to attract investor interest.
Best Stocks to Invest In: RSP Permian (RSPP)
Source: SarahTz Via Flickr
2018 Growth: 185.5%
2019 Growth: 33.8%
Expected 5-Year Growth Rate: 58.1%
As the name implies, RSP Permian (NYSE:RSPP) produces oil and natural gas in the Permian Basin of West Texas. Based in Dallas, this E&P company reports proven reserves of 376 million barrels of oil. With oil prices again moving higher, the fortunes of firms such as RSP have significantly improved.
However, unlike most of its peers, the oil price slump of a few years ago slowed but did not reverse revenue growth. Revenue growth came in at under 1% for 2015. Though normally a lackluster figure, this stands as an impressive feat given that many of its peers saw revenues fall by more than 50%.
The RSPP stock price also traded in a range, avoiding the massive selloffs plaguing many other E&P stocks. Although RSPP stock reported losses in 2015 and 2016, they remained relatively modest. The company again moved to profitability in 2017, earning 83 cents per share that year.
Analysts expect earnings to continue shooting higher with analysts placing consensus estimates at $2.32 per share for 2019 and $3.03 for 2020. Plus, with the stock trading at around $43 per share, RSPP stock holds a forward PE ratio of about 18.5. With a 58.08% profit growth average, RSPP stock could see massive gains even without multiple expansion.
With strong pricing in oil and RSP’s massive reserves, RSPP could become one of the best stocks to invest in right now.
Best Stocks to Invest In: LATAM Airlines (LTM)
2018 Growth: 102.2%
2019 Growth: 41.5%
Expected 5-Year Growth Rate: 54.9%
Very rarely does an airline stock such as LATAM Airlines (NYSE:LTM) make any “best stocks to invest in right now” list. LTM stock stands as one of the few exceptions. The Santiago, Chile-based airline connects passengers to destinations across Latin America and often to places outside of its core region such as the United States and Western Europe. Moreover, its home country Chile has long enjoyed one of the best economies in South America. With an increased focus on commodities, both LTM and Chile remain well-positioned for growth.
LTM stock has struggled for most of the decade. During the commodity slump, the stock fell from the low $30s per share range to below $5 per share in 2015. More recently it fell to the $10 per share range of today after moving as high as $17.39 per share earlier this year. However, a comeback could be in the works. Profits, which stood at 26 cents per share for 2017, are expected to rise. Analysts predict earnings of 59 cents per share this year and 85 cents per share in 2019.
This takes its forward P/E below 20. Since LTM stock has not seen a single-digit P/E ratio since 2008, the stock should likely grow along with LATAM’s profit levels. With the recent low of the stock price and the massive profit growth predicted, LTM will enjoy strong tailwinds in its path to growth.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting.
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