Do you need some new names for the growth portion of your portfolio, but you're worried about the market's go-to growth picks' steep valuations? If this sounds like you right now, don't worry -- you're not crazy, and you're not alone. These are tricky times to be sure.
The good news is, you don't need to remain on the sidelines. You simply need to rethink your pool of prospects by considering some of the market's promising but lesser-known growth companies. Here are three growth stocks you might want to consider adding to your portfolio right now.
Image source: Getty Images.
1. BYD Company
It's been a frustrating past few months for BYD (BYDDY 0.56%) stockholders. Shares of China's electric vehicle (EV) powerhouse are trading down nearly 40% from May's peak and still knocking on the door of lower lows.
Blame competition, mostly. BYD's still leading China's electric vehicle market, accounting for 23.2% of the country's EV sales in November. That's down from its year-earlier share of 32.9%, though, according to numbers from China's Passenger Car Association. It's a challenge that investors aren't accustomed to seeing BYD face.
There's hope on the horizon, however, for a couple of reasons.
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The first of these reasons is the fact that we're now roughly one full year into this stepped-up competition. Going forward, the widespread availability of EVs from rivals like Geely, Li Auto, and Chery will no longer be new. So, from here, BYD should be able to use its massive scale to at least maintain its leading market share.
As for the second reason that this prolonged pullback is a buying opportunity, BYD is making incredible inroads outside of China, particularly in Europe. Although Tesla still technically sold more EVs on the continent than BYD did in November, with 22,801 units versus BYD's 21,133, BYD's European registrations jumped 222% year over year, while Tesla's fell 12%. Both changes extend well-developed trends.
At least some of the credit for this growth must be given to the fact that BYD now owns eight of its own car-carrying boats, allowing it to ferry as many as 1 million electric vehicles every year ... but not just from China. Regardless, with this delivery capacity in place, the company is now aiming to double the number of European sales sites by the end of this year, further opening up a massive market that's been far more receptive to EVs than the United States has been.
2. Upstart
In their infancy, credit bureaus like TransUnion and Equifax functioned about as well as one might expect them to without the advantage of modern-day computing and constant connectivity. But once these technology tools became available, the business didn't actually evolve as much as you might expect it to.
Upstart (UPST 5.28%) is capitalizing on this complacency.
In simplest terms, Upstart is a new kind of credit bureau. Rather than compiling an individual's income, debt load, credit mix, and payment history to come up with a conventional credit score, Upstart utilizes an artificial intelligence algorithm that considers over 2,500 different data points about an individual's ability and willingness to repay a loan.
The end result is 43% more approvals without any additional defaults. Better still, this approach allows 33% of borrowers to enjoy a lower interest rate than they'd be offered using a more typical means of credit scoring. Perhaps best of all, more than 90% of the loans it approves are fully automated rather than requiring a human-made decision. That's why more than 100 banks, credit unions, and lenders now use Upstart to help them make lending decisions.
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And a whole bunch more are now coming on board. During the third quarter of last year, Upstart's 428,056 loan originations were up 128% year over year, driving revenue up 71% to $277 million and pushing Upstart out of the red and into the black.
Analysts expect similar growth on its top and bottom lines at least through 2027, too, which will make a particularly bullish impact on its profitability. To this end, this growth stock is currently priced very attractively at only about 20 times this year's expected per-share earnings of at least $2.39.
3. AppLovin
Last but not least, add AppLovin (APP 1.33%) to your list of growth stocks to consider buying right now if you have $1,000 (or a similar amount of money) to work with that you know you won't be needing to touch in the near future.
It's not a household name, but you've probably experienced its work firsthand. If you've ever seen an ad for a mobile app, there's a good chance AppLovin's technology delivered it -- the company's flagship Axon platform allows brands to self-insert their advertisement in several other apps. It's not just simple app-based advertising, though.
AppLovin's Wurl offers the same solution within the realm of streaming video, while its Adjust tech helps advertisers and brands measure and monitor their advertising campaigns. In many ways, it's the one-stop solution that app developers and advertisers have been waiting for.
That's what the numbers suggest anyway. The company's revenue grew by nearly 70% to $1.4 billion during the three-month stretch ending in September, nearly doubling its operating income as a result, allowing the company to once again top analysts' estimates. Look for more of the same going forward, too. Although there doesn't appear to be a major barrier preventing others from entering or penetrating this same space, AppLovin is clearly doing something to maintain its existing customers as it adds new ones, keeping would-be competitors at bay.
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Just don't tarry if you want in. Although the stock hasn't made any net progress since cooling off in October (thanks to a Securities and Exchange Commission investigation opened in October regarding the company's digital data-collection practices), following a race to a record high in September, the bulls appear to be testing the waters again, shrugging off the potential setbacks this probe's potential findings could theoretically prompt.
