Many growth stocks plunged over the past year as rising interest rates drove investors toward more conservative investments. However, that sell-off has also created some golden buying opportunities for patient investors who can tune out the near-term noise.
If you have $1,000 you can afford to lose, then you should take a much closer look at the small- to mid-cap growth stocks in this market -- which generally have more potential to become multi-baggers than their large- and mega-cap peers. I believe these three growth stocks fit that description: Vuzix (VUZI 10.25%), Impinj (PI 2.60%), and Asana (ASAN 1.35%). Let's find out a bit more about these three stocks.
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1. Vuzix
Vuzix produces augmented reality (AR) glasses for enterprise clients, OEM customers, and mainstream consumers. Its products haven't attracted as much attention as higher-profile AR devices like Alphabet's Google Glass or Microsoft's HoloLens, but they've still won over a growing number of customers -- especially across the enterprise and healthcare markets.
Between 2016 and 2021, Vuzix's annual revenue rose from $2.13 million to $12.79 million, representing a compound annual growth rate (CAGR) of 43%. At the end of 2021, CEO Paul Travers said the AR market had finally started a "definitive shift toward enterprise adoption" across the healthcare, industry 4.0, logistics, and supply chain verticals.
Analysts expect Vuzix's revenue to rise 10% this year, as the near-term supply chain and macro headwinds throttle its shipments, but increase 50% to $21.8 million in 2023 as it overcomes those challenges. However, the company isn't profitable yet, and its stock isn't cheap at 26 times this year's sales.
Vuzix is still a speculative play, but it could still have a lot of room to grow as the AR market expands. In addition, its low market cap of about $320 million could still make it a tempting takeover target for Google, Microsoft, or any other tech giant that wants to sell enterprise AR devices.
2. Impinj
Impinj is one of the world's leading producers of radio frequency identification (RFID) chips, which are often used to track products as they move through supply chains, logistics networks, and retail stores. It also sells the card readers and software for processing those chips.
Over the past several years, the "retail apocalypse" forced many brick-and-mortar retailers to tag their products with Impinj's RFID tags to closely monitor their inventories and long-term sales trends. Its chips were also used to power omnichannel fulfillment platforms, anti-theft chips, self-checkout kiosks, and other in-store modernization initiatives.
Between 2016 and 2021, Impinj's annual revenue rose from $112 million to $190 million, which represented a CAGR of 11%. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased at a CAGR of 12% from $5.1 million to $9.1 million.
Impinj's growth cooled off during the pandemic as many retailers closed down, but the ongoing supply chain disruptions worldwide will likely generate long-term tailwinds for its business. As a result, analysts expect Impinj's revenue to rise 21% this year and grow another 24% in 2023.
Impinj's market cap of $1.3 billion values it at six times this year's sales. That's a reasonable valuation for a growing company that leads a small -- but crucial -- niche of the Internet of Things (IoT) market.
3. Asana
Asana provides a work management platform that enables teams to organize, track, and manage their projects. Its tools can be directly integrated into popular business software suites like Microsoft Office, Google Workspace, and Salesforce.
Asana went public via a direct listing in September 2020. It started trading at $27 a share, hit an all-time high of $142.68 last November, and now trades at about $20. Its stock price tumbled as investors fretted over its frothy valuation and ongoing losses.
Those concerns largely overshadowed the fact that Asana's revenue rose 59% in fiscal 2021 (which ended last January) and accelerated to 67% growth in fiscal 2022 as its number of paying customers climbed 28%. For fiscal 2023, it expects its revenue to rise 42%-43%.
Based on that guidance and its market cap of $3.8 billion, Asana looks reasonably valued at seven times this year's sales. Its widening losses are still worrisome, but its adjusted gross margins expanded year over year in both fiscal 2022 and the first quarter of fiscal 2023 -- so its profitability could gradually improve as it reins in its operating expenses. Asana's stock might remain in the penalty box for now, but it could win over the bulls again if it stabilizes (or even narrows) its losses.
