Earnings season is largely in the rearview mirror, and there are some growth stocks that reported not only impressive results, but clear paths to long-term profitability. And not only that, but some of the best results came from companies whose stocks are trading well below their recent highs. Here are three in particular that could be worth a closer look right now.
Don't lose faith in this fintech leader
As CEO Jack Dorsey stated in his letter to Block's (SQ 2.32%) shareholders, "We've been quiet lately because we've been focused." After a couple years of growth moves that didn't seem central to the business, such as the acquisition of music platform Tidal, Block is refocusing its efforts on its Cash App and Square business ecosystems.
Management is also focusing on profitability and shareholder value. The company has capped its number of employees, focused on controlling costs, and more. Dorsey outlined several areas where massive growth potential exists, such as focusing on banking services on both the consumer and business sides of the massive fintech company.
The third-quarter numbers look impressive. Block's gross profit increased by 21% and the company's adjusted EBITDA increased by 46% year-over-year. Dorsey also announced a $1 billion buyback program, which indicates that at 45% below its 52-week high, management may see an opportunity in the stock.
Incredible momentum, with profits coming very soon
In the third quarter, SoFi's (SOFI 3.69%) business momentum remained extremely impressive. The company's membership base grew 47% year-over-year, an acceleration from the second quarter, and the number of financial services products used by those customers increased at an even faster 50% rate. This drove 27% revenue growth to the company's highest quarterly total ever.
However, SoFi isn't just an impressive growth story. It's also rapidly heading toward profitability. Its adjusted EBITDA margin went from 11% a year ago to 18% and management significantly raised its full-year guidance on both the top and bottom line. Plus, SoFi's leaders have said the business would reach GAAP profitability in the fourth quarter, and they reiterated that claim.
A big opportunity with even bigger temporary headwinds
To be fair, Redfin's (RDFN 8.49%) business has slowed down considerably in the current real estate market, because of soaring home prices and mortgage rates that have resulted in a generational low in the number of existing homes for sale. In the third quarter, Redfin's revenue dropped by 12% compared to year-ago levels.
However, the company is making all the right moves to boost profitability and set itself up for success when the market improves. It completed several rounds of layoffs, exited the money-losing iBuying business, and renewed its focus on its core real estate services and technology platform. And the numbers show it's working -- despite the revenue decline, Redfin's net loss dropped from more than $90 million in the third quarter of last year to $19 million and was actually profitable on an adjusted EBITDA basis. Not only that, but Redfin's market share improved, and more users are using its mobile apps and websites. There's a massive long-term opportunity for disruption in the ways we buy and sell homes, and if Redfin can capitalize, the current market cap of $650 million (over 90% below its all-time high) could end up looking like a bargain.
Prepare for turbulence
It's important to emphasize that even if things go well for all of these companies, these are likely to be volatile stocks for the foreseeable future. Any positive or negative surprises with their growth rates, profitability, or other key metrics could cause the stock to spike lower or higher quickly. So, while I own all three of these stocks myself and think they have massive potential, invest with an expectation of some turbulence as the next chapters of these growth stories unfold.
