Last year began ugly for the stock market, with all three indexes racking up double-digit percentage losses at one point. However, by year's end, the broad-based S&P 500 had risen by a healthy 9.5%.
For buy-and-hold investors, the trading action in 2016 and since March 2009 has vindicated the strategy of buying high-quality companies and staying put for the long term. Yet quite a few high-quality names have also moved lower recently, giving long-term investors an opportunity to potentially scoop up great stocks at bargain prices.
What makes some of this year's bargains so enticing is that a few of these high-quality companies are growth stocks. Though the term "growth stock" can be completely arbitrary, I prefer to define a growth stock as a company that has the capacity to grow by 10% or more per year. Growth stocks are operating in an especially friendly environment at the moment, with lending rates remaining near their historic lows. This is giving growth companies the opportunity to reinvest in their business, hire, and acquire for relatively minimal borrowing costs.
After perusing a list of growth stocks that are down more than 10% over the trailing 12 months, three stood out as being attractively priced for long-term investors this winter.
Practically every Wall Street analyst loathes social media giant Twitter (NYSE:TWTR) at the moment, especially after its failed yard sale, but that's just fine with this Fool.
Perhaps the greatest allure for owning Twitter is the amount of impressions the website is still generating, even if subscriber growth has somewhat stalled out in recent quarters. Twitter ended the third quarter with 317 million monthly active users, a 3% increase from the previous quarter. However, daily active usage grew by a more impressive 7% year over year. The simplicity of Twitter's platform, combined with the fact that 90% of its advertising revenue came from its mobile applications, implies that it still possesses relatively strong pricing power with advertisers.
On the flip side of the equation, Twitter is spending its cash more wisely, which should result in improved margins and profitability in the years to come. Twitter's focus on video and live-streaming options, along with its partnerships, such as its live-streaming deal with the National Football League reached in August, suggest that its focus on high-growth avenues should translate into improved results in the quarters to come.
With Twitter's earnings per share expected to more than double between 2015 and 2019, Twitter's niche position in social media shouldn't be overlooked by growth-seeking investors.
Another growth stock that should have the attention of growth investors is small-cap CalAmp (NASDAQ:CAMP), a company at the center of the Internet of Things (IoT) movement.
The IoT describes the interaction of devices connected to the web and each other. According to BI Intelligence, some $6 trillion will be invested in the IoT between 2015 and 2020, with a grand total of 24 billion installed and connected devices by the end of the decade ranging from cars to thermostats. Wall Street simply overestimated how quickly the IoT would catch on and punished practically every company within the industry when they didn't live up to those lofty expectations. Given the right amount of time and patience, CalAmp is in the perfect niche to benefit from the double-digit annual growth potential of the IoT.
The acquisition of LoJack should also be a near-term and long-term catalyst for the company. Over the near term, it provides a quick boost in revenue and EPS, while over the long run it allows CalAmp to develop a stronger relationship with the auto industry, which is expected to be a big adopter of IoT technology in the years to come.
Lastly, don't overlook the improved geographic diversification CalAmp brings to the table. In its most recent quarterly report, 28.5% of revenue was derived from overseas markets, which is a new record.
Sporting a sub-one PEG ratio, CalAmp could be ripe for the picking by growth investors.
Finally, I'd suggest growth investors pay attention to drug developer Pacira Pharmaceuticals (NASDAQ:PCRX), which has been beaten up over the trailing-12-month period to the tune of a 38% loss. At the heart of Wall Street's concerns has been the slowing sales of Exparel, an injectable analgesic used in the post-surgical setting that currently accounts for about 95% of Pacira's sales.
The good news, and the reason investors should consider giving Pacira the time of day, is that the slowdown in Exparel may have been overstated. During the third quarter, sales of Exparel grew by 9% from the prior-year period. Furthermore, Pacira issued its preliminary full-year report last week and said to expect $276.4 million in revenue, an 11% increase from the previous year. This full-year preliminary sales total suggests that Exparel sales likely hit the high end of the company's full-year sales guidance based on its Q3 update.
The real excitement for Pacira's Exparel is that its label has been expanded into the oral surgery setting. Soft tissue surgeries and orthopedic patients gave Exparel a patient pool of approximately 42 million people. The oral surgery expansion gives Exparel 35 million new potential patients. This large expansion of its patient pool could be just what Exparel needs to push toward $500 million in peak annual sales.
Pacira's PEG of just 1.1 makes this growth stock a bargain worth considering this winter.