The stock market hates uncertainty, and the global factors driving the market in 2022 have understandably left many investors feeling frustrated. If you're looking for the light at the end of the tunnel, you're not alone.
While no one can predict when this volatile period will wrap up, the history of the stock market has shown that patient investors who maintain stakes in great businesses can sustain and compound rewarding returns with time. Share price alone shouldn't ever induce you to buy or sell a stock, but there are some tempting growth-oriented businesses either trading down or at enviable multiples that warrant a second look in the current market.
Here are three such names to consider.
1. Vertex Pharmaceuticals
Vertex Pharmaceuticals (VRTX 1.31%) focuses on treating patients with rare genetic diseases. Its pipeline includes candidates that target diseases including sickle cell disease, Duchenne muscular dystrophy, and the blood disorder beta thalassemia. Currently, the company relies on its portfolio of cystic fibrosis (CF) medicines to drive revenue and profits, and it continues to deliver on both fronts year after year.
Over the past five years, Vertex has grown its revenue by more than 200%, while its net income and operating income have risen by 789% and 607%, respectively, in the same period.
These momentous gains have been driven by its CF treatments Trikafta, Orkambi, Kalydeco, and Symdeko. These four medicines raked in total revenue of $6.2 billion in 2021, a 22% increase from the prior year.
Vertex currently trades at a price-to-earnings (P/E) ratio of 25 and a price-to-sales (P/S) ratio of about 9. Its P/E might not appear cheap at first glance, but when you consider the tremendous runway that the company has, its valuation shouldn't cause investors alarm.
It's also worth noting that while the S&P 500 has dipped by double digits over the last year, shares of Vertex are up by roughly 65% in that same period.
Vertex controls the leading share of the global cystic fibrosis market with few competitors. That, coupled with its long-term growth trajectory in the broader rare-disease drug space (it's about to file for approval for its drug exa-cel with CRISPR Therapeutics) are all green flags for the company's long-term potential.
2. Airbnb
Airbnb's (ABNB 1.58%) P/E ratio currently stands at about 41, but it trades at a more palatable P/S of 8. Although shares have dropped by close to 50% over the past year, this isn't because of factors tied directly to its business.
Rather, volatile investor sentiment about growth stocks, and fears of a recession that could impact the travel industry in the short term, have pummeled shares of Airbnb. However, even as the stock has seen its fair share of rocky market days, its underlying business has continued to record win after win.
In 2021, Airbnb's rebound from its pandemic woes saw it grow revenue to $6 billion, up 25% from pre-pandemic levels. Its net loss shrunk from $4.6 billion in 2020 to $352 million in 2021.
In the most recent quarter, revenue, net income, and Nights and Experiences booked increased by 29%, 46%, and 25%, respectively, compared to the same period in 2021.
With more and more people living at an Airbnb (long-term stays account for 20% of its total bookings), it's increasingly apparent that the travel industry's dynamics are only part of a broad range of factors propelling the company's growth.
The changing world of work and the increasing number of individuals seeking flexible living arrangements over traditional leases can also drive Airbnb's business. The company is well-positioned to meet the changing needs of consumers and enrich investors in the process.
3. Fiverr
Fiverr International (FVRR 3.50%) has seen its shares tank nearly 80% over the past year, and it currently trades at an attractive P/S multiple of about 4. Fiverr's downfall has stemmed from a combination of company- and market-specific factors.
One reason some investors have likely dumped the stock is that it's not profitable on the basis of generally accepted accounting principles (GAAP). But this isn't unexpected for a company like Fiverr, which is investing heavily in its long-term growth.
Fiverr spent 13% more on sales and marketing in the first nine months of 2022 than it did in the same period last year. And as a rule, many investors have shied away from growth-oriented businesses as fears of a recession and market volatility have reigned supreme recently.
Still, the company is one of the leading platforms servicing the global gig economy, a space on track to hit a valuation of $873 billion by 2027. Regardless of a potential recession, the gig economy is set to thrive in the years ahead as more workers seek the flexibility to earn or supplement their income on their own terms. In turn, gig talent is an attractive solution for companies wanting to meet shifting and recurring needs. Businesses of all sizes might also be even more apt to hire contract workers than actual employees during an economic downturn.
In its most recent quarter, the company grew revenue, active buyers, and spend per buyer by 11%, 3%, and 12%, respectively, year over year.. And its take rate from transactions has also risen steadily over the years, jumping 160 basis points from the prior-year period. This follows revenue growth of 57% for 2021.
Fiverr continues to grow revenue and gradually improve its bottom line with its strengthening foothold in the highly lucrative, still-underpenetrated gig economy. This bodes well for both its balance sheet and long-term investors.
