While the number of stocks trading near 52-week lows has dwindled, with the market rebounding over the past six months, the three growth stocks we will look at today have yet to recover fully.
However, despite their discounted share prices, SoFi Technologies (SOFI -2.91%), ZoomInfo Technologies (ZI -1.51%), and Generac (GNRC -1.21%) have operations that should only grow more robust over the next decade.
If you have $5,000 available to invest across these three companies, the multibagging potential within these three businesses could lead you toward a timely retirement.
Let's take a deeper look.
1. SoFi Technologies
Down about 6% in the past month amid the calamity in the financial sector, SoFi and its one-stop shop for financial services saw its recent rally to start 2023 stall as investors seemingly lost faith in any stock tied to banking.
Now trading roughly 35% above its 52-week lows -- but still down 47% from its 52-week highs -- SoFi's stock appears stuck in limbo as the market worries about the company's rapidly expanding banking operations.
Initially well known for its lending segment consisting of personal, student, and home loans, SoFi received a bank charter designation in 2022 and launched full speed ahead into the financial services arena. Highlighting this incredible ramp-up within its fledgling unit, the company saw deposits from its customers grow from $1 billion early last year to $7.3 billion in its most recent quarter.
Although this incredible growth would generally be viewed as a positive, recent bank runs leave investors asking: Is SoFi safe?
First, roughly 90% of the company's burgeoning deposit base is insured, compared to 15% at failed Silicon Valley Bank. This layer of security is important, as it preempts the need for customers to withdraw their funds for fear of losing them in the first place.
Second, 88% of SoFi's deposits came via direct deposits, meaning they are consistent and predictable, building a sticky, stable base of funding.
Third, the company has $5 billion undrawn on its $8.4 billion warehouse to continue running its lending segment. Combined with this large base of deposits, these figures highlight that SoFi has excess capital.
Furthermore, at a time when many smaller banks have seen their depositors flee for the megabanks, SoFi expects to see deposits grow by at least $2.3 billion in its next quarter. Management expects these deposits to save $125 million annually in loan origination funding, a significant figure compared to its sales of $1.6 billion last year.
Armed with this low-cost funding, SoFi has forecast 25% to 30% sales growth in 2023, a stand out performance in the tumultuous banking sector.
2. ZoomInfo Technologies
ZoomInfo's cloud platform shortens sales processes and boosts customer efficiency by offering go-to-market insights and data needed for sales, marketing, operations, and recruiting professionals.
Highlighting the value of the company's platform, business software review aggregator G2 listed ZoomInfo as the No. 1 offering or a leader in 13 marketing and sales niches. From contact and company data to targeted audience solutions to buyer intent tools, the company's treasure trove of data helps more than 30,000 clients reach their maximum potential.
Unlocking value by increasing revenues, streamlining efficiencies, building out pipelines, and improving conversion rates, ZoomInfo's operations justify the saying, "Data is the new oil."
However, despite its ever-expanding list of use cases and a near-quadrupling of its sales since the start of 2020, ZoomInfo's stock has dropped almost 30% below its initial public offering price.
Only 12% above its 52-week lows, the company's price-to-sales (P/S) ratio remains near all-time lows, offering an intriguing entry point for investors.
ZI PS Ratio data by YCharts
On top of increasing sales by 36% in the fourth quarter of 2022, ZoomInfo posted a 20% free cash flow (FCF) margin -- even after removing stock-based compensation. Using the company's P/S ratio of 8.9, we can calculate that ZoomInfo trades at 45 times FCF as of its most recent quarter.
While this is not necessarily cheap, the company's leadership positioning, rapid growth rates, and strong cash generation make it worth this premium. In an increasingly data-driven world, this blend of characteristics makes ZoomInfo a promising buy-and-hold investment to hang on to for the decades ahead.
3. Generac
Generac is famous for its residential standby generators and holds a 75% market share of this niche market. However, the company has its sights set on the broader energy industry, making 19 acquisitions since 2017.
Led by these acquisitions and the "electrification of everything" megatrend, the company has increased sales annually by 24% and 14% over the past five and 10 years, respectively. This incredible growth sent Generac's stock into the stratosphere -- only to fall back to its previous levels, as sales growth slowed in 2022 and is expected to decline by roughly 8% in 2023.
Held back by a soft consumer spending environment and bloated inventory, the company's P/S ratio in 2023 is the lowest it has been in the past decade, and the shares are only 24% above their 52-week low.
GNRC PS Ratio data by YCharts
Despite the company's struggles in 2022, it has averaged a net income margin of 10% during the past 10 years. Should Generac return to this level of profitability as the residential market normalizes, it would be trading at a reasonable 16 times earnings.
Furthermore, the company's commercial and industrial energy and storage operations exited 2022 with a record backlog and should only grow stronger as the company builds upon its 60% market share among U.S. telecoms.
Trading at this recently discounted valuation, Generac's shift toward working more with enterprise clients and new international markets makes it a prime multibagger candidate, trading near 52-week lows.
