Stocks to buy

3 Unloved Growth Stocks Poised for a Major Turnaround

The stock market recovery over the past couple of years has been anything but evenly-distributed. A handful of high-flying tech stocks dubbed the “Magnificent Seven” have largely powered the rebound, overshadowing many other quality businesses. As a growth investor, it can be easy to feel like you’ve missed the boat.

However, that couldn’t be further from the truth. While the market’s spotlight has centered on big tech, many compelling growth stocks across various sectors remain overlooked. Their businesses may take a bit longer to regain full strength following the pandemic, but make no mistake about it – their best days still lie ahead. Here are three such growth stocks I think are worthy of consideration right now.

Zynex (ZYXI)

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Zynex (NASDAQ:ZYXI) manufactures medical devices that help with pain management, muscle rehabilitation, and the monitoring of vital signs. With rising rates of obesity and chronic illness, demand for these types of products continues growing at a rapid pace. Zynex has also developed non-invasive medications for pain relief, positioning itself well in the health sector, given its current trends. We’ve seen incredible hype around new weight loss and diabetes treatments lately. I believe some of this momentum can spill over to benefit Zynex, too.

Fundamentally, Zynex impresses. Its gross margin of nearly 80% beats 98% of industry peers. From 2019-2021, the company delivered stellar top-line growth around 55-80% each year. Though that growth rate has slipped recently, Zynex’s revenue continues to grow at a healthy clip in absolute terms. Despite these positives, Zynex trades around 58% below its 2020 peak, after rebounding off 2022 lows. To me, this looks like a discounted, high-quality growth stock.

Consensus estimates forecast ZYXI quintupling its earnings per share over the next four years, with sales doubling over this period. At approximately 20-times 2024 earnings, these projections make Zynex an exciting value. If the company hits its projected metrics, analysts’ median price target implies 50% upside from here.

Spire Global (SPIR)

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I’ve touted the potential of Spire Global (NYSE:SPIR) since last October. Sure enough, shares have climbed nearly 80% since then, but I believe considerable runway remains ahead. In October, I noted Spire could deliver 10X returns for investors from its beaten-down levels amid ongoing business model improvements. Even after recent gains, I stand behind that bold call. This satellite company has reduced its losses in sequential quarters, and also seen impressive margin improvement compared to last year.

Consider that in 2022, Spire generated $80 million in revenue against $89 million in losses. Just two years later, projections for 2024 call for $142 million in revenue and around $35 million in losses – half of 2022’s levels. As Spire enhances efficiencies while leveraging its differentiated datasets, profitability appears set to follow at an impressive clip. If the company executes as it intends, I expect today’s stock price to look extraordinarily cheap within the next two to three years.

Between surging private space industry activity plus the potential for a new public sector space race with China, secular tailwinds should only strengthen for Spire. Satellite communications stand ready to enter mainstream use in the 2020s. Having weathered pandemic uncertainty, Spire now looks poised to ride its pole position to new highs, given fading macro headwinds.

This overlooked space data disruptor hasn’t gotten its due credit yet. However, day traders are starting to take notice again. Spire presents a unique play tied to multiple secular trends. I’m betting on outsized returns over the long-term, even after the stock’s latest pop.

Gambling.com (GAMB)

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Last summer, gambling and casino stocks surged amid red-hot travel demand and heavy sports betting interest. However, that hype has certainly faded, pressuring Gambling.com (NASDAQ:GAMB). Currently, GAMB stock is 35% off its 2023 highs, and trading in rangebound territory lately. In my view, Mr. Market overreacted here. A single quarterly earnings miss seems insufficient to justify such a harsh reversal.

True, increased marketing costs pressured Gambling.com’s profitability last quarter. Yet, the company’s revenue still grew 19.4% year-over-year to $23.5 million as profits jumped 122% to $5 million, with its earnings per share exceeding estimates by more than 37%. Since its summer peak, GAMB stock has traded at nearly half its historical trailing price-sales multiple, despite consistent double-digit growth.

Currently, the consensus outlook for Gambling.com suggest earnings per share will double over the 2023-2026 period, and revenue growth should double by 2027. At only 12-times forward 2024 earnings, GAMB stock looks relatively inexpensive for a small cap executing at that clip. No wonder analysts predict this online gabling company has an average upside around 67%, given its profitability improvements.

In my view, momentary margin compression doesn’t negate Gambling.com’s long growth runway. As the global online gambling market expands toward $138 billion by 2028, Gambling.com should keep winning market share via its performance marketing and affiliate expertise. Once markets recognize the overreaction, this left-behind growth stock appears ready to rebound back toward summer highs.

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.

Omor Ibne Ehsan is a writer at InvestorPlace. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as cryptocurrencies and penny stocks. You can follow him on LinkedIn.

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