In this piece, we will take a look at the 15 cheap growth stocks to buy. For more stocks, head on over to 5 Cheap Growth Stocks to Buy.
Growth is the buzzword in the economy these days. This is due to the high turbulence within both the global economy and the American economy which is providing a nightmarish situation for analysts and U.S. officials. Consider several statements made by the U.S. Secretary of Treasury, Janet Yellen for instance. In America, there are growing fears of a banking crisis, as many that were against a rapid interest rate hike by the Federal Reserve have used the failure of SVB Financial Group (NYSE:SIVB) and other banks to point out that the system is under stress and that the Fed needs to stop raising rates. After SVB’s collapse, and problems at other banks, fears spread in America of bank deposits being unsafe, and in order to prevent future bank runs, many called for the U.S. government to guarantee all of the $19.2 trillion bank deposits to ensure that people don’t take their money out of the system and cause a collapse of a precariously built industry.
Within this chaos, Ms. Yellen is doing all that she can to assuage analyst and economist concerns. The Secretary initially started out by stating to the Senate Appropriations subcommittee on Wednesday, March 22, 2023, that her government was not considering any action to blanket insure all deposits in the U.S. banking system. These statements came amid strong opposition by the Republican party to oppose any such move, following a policy against government largesse. However, a day later, she talked back about the severity of her comments, as she stated that the government was willing to guarantee deposits at any bank that might face a situation similar to the bank run at SVB that took place over a weekend and left both management and observers surprised with its severity and quickness. Crucially still, we’ll have to take her statements apart to see a rapid shift in just days.
For instance, take Ms. Yellen’s statements to the American Bankers Association Conference in Washington on Tuesday, March 21, 2023 which outlined:
“Our intervention was necessary to protect the broader US banking system, and similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.”
Then, just a day later, her statements that we’ve mentioned above were precise as follows:
“These are tools we could use again for an institution of any size if we judge that its failure would pose a contagion risk.”
Within a day, the Secretary had shifted from stating that only smaller institutions might receive government help to also hinting that larger banks could also see support if her government deemed it to be necessary.
But where does all this debate factor in growth? Well, the current turmoil is a result of a myriad of factors, the heart of which is inflation. Inflation kills purchasing power and ends up straining both the top and bottom line revenues of firms. The top line sales are affected as people are less willing to splurge, and the bottom line takes a hit as the cost of business goes up. To battle inflation, the Federal Reserve has to hike interest rates, to stimulate people to reduce the cash flowing within the U.S. economy and keep it inside banks. At the same time, it also aims to further dent their purchasing power, and by effect, reduce the amount that they spend on goods and services – to finally bring down prices to an acceptable level.
However, since high interest rates also raise the cost of raising capital for business, they end up affecting business growth. And since businesses doing well is tied to the broader gross domestic product (GGP), higher rates also cull economic growth. So, economists end up warning everyone that high rates will reduce growth and potentially tip the economy into a recession.
On the recessionary front, the latest take comes from the investment bank JPMorgan Chase & Co. (NYSE:JPM) whose analysts were quoted by Fortune Magazine in March 2023:
“The Fed is facing a difficult task on Wednesday, but it is likely already past the point of no return,” JPMorgan strategists led by Marko Kolanovic, the bank’s chief global markets strategist, wrote in a note to clients Monday. “A soft landing now looks unlikely, with the airplane in a tailspin (lack of market confidence) and engines about to turn off (bank lending).”
For those unaware, in economic terms, a hard landing refers to a rapid slowdown of growth after sustained levels. This causes a large number of businesses to shut down and creates widespread misery all around. For its part, the Fed is optimistic about the strength of the U.S. banking system, as in its latest monetary policy statement that followed a small 25 basis point (0.25%) interest rate hike, the bank outlined:
The U.S. banking system is sound and resilient. Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain. The Committee remains highly attentive to inflation risks.
With these details in mind, let’s take a look at some high growth yet cheap stocks. Out of these, the top picks are SilverBow Resources, Inc. (NYSE:SBOW), Chimerix, Inc. (NASDAQ:CMRX), and Nisun International Enterprise Development Group Co., Ltd (NASDAQ:NISN).
Image by Gerd Altmann from Pixabay
Our Methodology
In the finance industry, a cheap stock is typically defined as one that has a price to earnings ratio of less than 15. This ratio divides the latest share price with its earnings, and the logic behind it values the premium offered by the market participants to the shares compared to what the firm brings in the form of earnings. For this piece, we have considered firms with a P/E ratio of less than 10 and an annual revenue growth higher than 15% for the past five years. Out of these, the top fifteen cheap growth stocks are selected and ranked according to the price to earnings ratio. The revenue growth has been manually verified to ensure no discrepancies, and care has been taken to ensure that the list is not titled towards oil companies or other firms that have faced one off revenue growth.
15 Cheap Growth Stocks to Buy
15. Asbury Automotive Group, Inc. (NYSE:ABG)
Latest P/E Ratio: 4.49
Asbury Automotive Group, Inc. (NYSE:ABG) is an American car retailer that sells used and new cars alongside repair and other services. It is based in Duluth, Goergia.
From the $7.2 billion in revenue it posted in $7.2 billion, the firm grew this to $9.8 billion in 2021 and a further $15.4 billion by the close of last year. During Q4 2022, 26 of the 943 hedge funds surveyed by Insider Monkey had bought the firm’s shares.
Asbury Automotive Group, Inc. (NYSE:ABG)’s largest investor is Lauren Taylor Wolfe’s Impactive Capital which owns 2.2 million shares that are worth $394 million.
Along with Chimerix, Inc. (NASDAQ:CMRX), SilverBow Resources, Inc. (NYSE:SBOW), and Nisun International Enterprise Development Group Co., Ltd (NASDAQ:NISN), Asbury Automotive Group, Inc. (NYSE:ABG) is a high growth and cheap stock.
14. Zymeworks Inc. (NASDAQ:ZYME)
Latest P/E Ratio: 4.35
Zymeworks Inc. (NASDAQ:ZYME) is a biotechnology company that develops treatments for cancer. The firm is headquartered in Vancouver, Canada.
Zymeworks Inc. (NASDAQ:ZYME)’s 2022 full year results saw the firm post a whopping 1,426% revenue growth as its partnership with Jazz Pharmaceuticals led to a massive payment. Insider Monkey dug through 943 hedge funds for last year’s fourth quarter and found out that 24 had invested in the firm.
13. Farmmi, Inc. (NASDAQ:FAMI)
Latest P/E Ratio: 4.31
Farmmi, Inc. (NASDAQ:FAMI) is a Chinese packaged goods company that is headquartered in Lishui, China.
Farmmi, Inc. (NASDAQ:FAMI) has shown consistent revenue growth since 2019. Its $30 million revenue in 2019 grew to $39 million in 2021 and to $99 million in 2022. As of last year’s fourth quarter, one of the 943 hedge funds part of our database had invested in the company.
Jim Simons’ Renaissance Technologies is ZFarmmi, Inc. (NASDAQ:FAMI)’s only investor in our database. It owns 171,307 shares that are worth $69,000.
12. Tricon Residential Inc. (NYSE:TCN)
Latest P/E Ratio: 3.74
Tricon Residential Inc. (NYSE:TCN) is a housing company that has tens of thousands of apartments in its portfolio.
Tricon Residential Inc. (NYSE:TCN)’s revenue growth between 2020 and 2022 sits at 76%. Insider Monkey took a look at 943 hedge fund portfolios for last year’s December quarter and found out that 12 had invested in the company.
Tricon Residential Inc. (NYSE:TCN)’s largest investor is Dimitry Balyasny’s Balyasny Asset Management which owns 2.8 million shares that are worth $22 million.
11. Western Alliance Bancorporation (NYSE:WAL)
Latest P/E Ratio: 3.32
Western Alliance Bancorporation (NYSE:WAL) is an American regional bank headquartered in Phoenix, Arizona. The firm offers accounts, certificates, and other banking products.
From $1 billion in 2019, Western Alliance Bancorporation (NYSE:WAL)’s revenue jumped to $1.8 billion in 2021 and $2.2 billion in 2022 for stable growth. As of Q4 2022, 26 of the 943 hedge funds profiled by Insider Monkey had held a stake in the firm.
Lansing Davis’ Davis Capital Partners is Western Alliance Bancorporation (NYSE:WAL)’s largest shareholder. It owns 2.5 million shares that are worth $148 million.
10. YPF Sociedad Anónima (NYSE:YPF)
Latest P/E Ratio: 2.91
YPF Sociedad Anónima (NYSE:YPF) is an Argentian oil company headquartered in Buenos Aires. The firm explores, refines, markets, and sells oil and gas products.
Despite being an oil company, YPF Sociedad Anónima (NYSE:YPF) has shown stable revenue growth since 2019, with its revenue in 2019 of ARS 665 billion nearly doubling to 1.2 trillion ARS in 2021. As of last year’s December quarter, 12 of the 943 hedge funds surveyed by Insider Monkey had invested in the firm.
YPF Sociedad Anónima (NYSE:YPF)’s largest investor in our database is Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital which owns 2.8 million shares that are worth $25 million.
9. Capital Product Partners L.P. (NASDAQ:CPLP)
Latest P/E Ratio: 2.06
25% Capital Product Partners L.P. (NASDAQ:CPLP) is a shipping company that is headquartered in Piraeus, Greece. The firm has 21 vessels in its fleet, including some of the largest ones that sail the oceans.
During Q4 2022, Capital Product Partners L.P. (NASDAQ:CPLP) reported $79.8 million in revenue which marked a 25% annual growth. For their December quarter of 2022 investments, four of the 943 hedge funds profiled by Insider Monkey had bought the firm’s shares.
Josh Overdeck and David Siegel’s Two Sigma Advisors is Capital Product Partners L.P. (NASDAQ:CPLP)’s largest investor through a $935 million stake that comes via 68,529 shares.
8. Gray Television, Inc. (NYSE:GTN)
Latest P/E Ratio: 2.03
Gray Television, Inc. (NYSE:GTN) is an American broadcasting company that is headquartered in Atlanta, Georgia.
Gray Television, Inc. (NYSE:GTN) has shown stable revenue growth since 2019, with its revenues jumping from $2.1 billion in the year to $2.4 billion in 2021 and to another $3.6 billion by 2022 end. Insider Monkey took a look at 943 hedge funds for their December quarter of 2022 investments and found out that 23 had bought the firm’s shares.
Gray Television, Inc. (NYSE:GTN)’s largest hedge fund investor is Anand Desai’s Darsana Capital Partners which owns 4.5 million shares that are worth $51 million.
7. CN Energy Group. Inc. (NASDAQ:CNEY)
Latest P/E Ratio: 2.00
CN Energy Group. Inc. (NASDAQ:CNEY) is a specialty materials company that provides carbon to several industries. It is headquartered in Lishui, China.
Between 2019 and 2021, CN Energy Group. Inc. (NASDAQ:CNEY)’s revenue grew by 82%, and between 2021 and 2022 it grew by 100%. As of 2022’s final quarter, one of the 943 hedge funds profiled by Insider Monkey held a stake in the firm. This lone investor is Jim Simons’ Renaissance Technologies with an $18,000 stake.
6. Daqo New Energy Corp. (NYSE:DQ)
Latest P/E Ratio: 1.97
Daqo New Energy Corp. (NYSE:DQ) is a Chinese semiconductor company headquartered in Shanghai. It makes semiconductors for solar sells and other related products.
Daqo New Energy Corp. (NYSE:DQ) has shown stable revenue growth since 2019, with revenues more than comfortably doubling annually since 2019. 20 of the 943 hedge funds polled by Insider Monkey had bought the firm’s shares in 2022’s fourth quarter.
Out of these, Lei Zhang’s Hillhouse Capital Management is Daqo New Energy Corp. (NYSE:DQ) largest investor. It owns 2.1 million shares that are worth $81 million.
SilverBow Resources, Inc. (NYSE:SBOW), Daqo New Energy Corp. (NYSE:DQ), Chimerix, Inc. (NASDAQ:CMRX), and Nisun International Enterprise Development Group Co., Ltd (NASDAQ:NISN) are some cheap growth stocks.
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Disclosure: None. 15 Cheap Growth Stocks to Buy is originally published on Insider Monkey.