12 Most Profitable Growth Stocks To Invest In

2. PDD Holdings Inc. (NASDAQ:PDD)

5-Year Revenue CAGR: 74.92%

TTM Net Income: $13.751 billion

Number of Hedge Fund Holders: 86

PDD Holdings Inc. (NASDAQ:PDD) is a global commerce group that operates various businesses, including the e-commerce platforms Pinduoduo and Temu. Pinduoduo offers a wide selection of products, ranging from agricultural goods and clothing to electronics, furniture, and personal care items. Temu is an online marketplace designed to connect businesses with consumers in the digital space.

The company management is making moves to improve its business significantly. The company is focusing on diverse consumer needs and has expanded its offerings in various categories, particularly in lower-tier cities. It experienced significant growth in the number of new merchants and agricultural vendors in recent quarters.

In the second quarter, PDD (NASDAQ:PDD) reported a remarkable increase in total revenues driven by online marketing and transaction services. However, management also highlighted rising costs, especially in fulfillment and operational expenses.

The company reported total revenues of RMB 97 billion (RMB 1 = US$0.14), representing an impressive year-over-year growth of 86%. The operating profit also experienced significant growth with a GAAP operating profit of RMB 32.6 billion, up from RMB 12.7 billion a year prior. The company closed the quarter with a healthy cash position of RMB 284.9 billion.

PDD (NASDAQ:PDD) is also trading at quite cheap levels. It is trading at a forward price-to-earnings ratio of 11.74, a nearly 30.4% discount to its sector median. Additionally, analysts expect a nearly 83.5% increase in its EPS this year.

Hayden Capital stated the following regarding PDD Holdings Inc. (NASDAQ:PDD) in its Q2 2024 investor letter:

“PDD Holdings Inc. (NASDAQ:PDD): A few weeks ago, Latepost (a leading Chinese technology news outlet) confirmed Pinduoduo’s online grocery initiative is solidly profitable (LINK). According to the article, Duoduo Grocery is able to achieve ~5% net profit margins in competitive markets (where they go up against Meituan Select). In non-competitive markets, they can achieve ~10 – 15% net margins.

The company doesn’t disclose the exact scale of Duoduo Grocery, but our calculations indicate it’s likely around ~RMB 300BN this year, and still growing in the double-digits. At that level, the division is likely contributing ~US $2.5BN in annual profits.

It’s an impressive result, but admittedly, not a huge needle-mover in light of the total $17.6BN net profits the company is expected to make this year (~14% of overall profits)…” (Click here to read the full text)