In this piece, we will take a look at the fifteen worst performing growth stocks in 2023. If you want to skip details about different kinds of investing strategies, then check out 5 Worst Performing Growth Stocks in 2023.
Growth stocks have the potential to deliver strong returns in the future if the economy and their fundamentals allow them to do so. Investors are often on the hunt for such companies since their economic moats can lead to rapid capturing of market share and scaling up of operations to deliver sizeable and stable revenue for a long time period. Most firms that were growth companies in the past but have matured now also pay dividends as a reward to patient investors who have provided capital to the company.
The two primary ways in which one can profit on the stock market are either through share price appreciation or dividends. Firms that deliver through the former often operate in sectors with difficult barriers to entry which have prevented others from capturing the market. For dividends, specially structured firms often allow management to pay the maximum amount of earnings as dividends in exchange for tax exemptions. One such category of dividend paying firms is called real estate investment trusts (REIT), with some top dividend paying REITs being American Tower Corporation (NYSE:AMT), Prologis, Inc. (NYSE:PLD), and Crown Castle Inc. (NYSE:CCI).
The central assumption behind classifying stocks with high price to earnings ratios as growth stocks is the belief in their ability to outperform major stock market indexes. As an example, consider chip designer Advanced Micro Devices, Inc. (NASDAQ:AMD). AMD’s shares have grown by 65% over the past five years while the S&P500 has grown by 53%, allowing the semiconductor firm that was once unable to turn a profit to outpace a collection of well performing stocks. AMD’s high price to earnings ratio before it became profitable proved to be correct, as investors had evaluated the share price as indicative of a firm able to significantly grow earnings per share before it was profitable. Their reward was a 12% premium to the S&P500’s returns.
These days, the stock market is testing the waters to see how well the broader U.S. economy and the global economy can withstand big monetary policy shocks and a consumer slowdown. Despite the U.S. stock market offering strong returns, with the start of September, the U.S. dollar has marked some of its fastest gains in history, with the dollar index effectively reversing all losses made since the March 2023 banking crisis. Additionally, the difficulty in controlling inflation has created speculation about central banks having to hold interest rates at high levels for longer time periods. Markets price in future expectations, and the latest ones about the dollar do not tend to bode well for either the stock market or global markets.
With the third quarter of 2023 in its third month, stock market returns have started to slow down. The S&P500 is up by 16.56% year to date but the growth slows down to 13.76% over the past six months and turns negative for August. Big tech mega cap stocks haven’t performed well either, with Apple Inc (NASDAQ:AAPL) down by 0.1% over the past four weeks and Meta Platforms, Inc.(NASDAQ:META) having lost 2.40% during the same time period. Others such as Microsoft Corporation (NASDAQ:MSFT) and Alphabet Inc (NASDAQ:GOOG) have posted modest gains and seen their shares dip and rise as sentiment about economic indicators shifts.
Today, we took a look at some of the worst performing growth stocks in 2023, out of which the stocks with the biggest share price drops and highest price to earnings ratio are Clearfield, Inc. (NASDAQ:CLFD), National Vision Holdings, Inc. (NASDAQ:EYE), and HomeStreet, Inc. (NASDAQ:HMST).
Our Methodology
To compile our list of the worst performing growth stocks in 2023, we gathered stocks with high price to earnings ratios and significant share price drops. A list of sixty companies was developed by filtering them first through share price drops and then high P/E ratios. The final companies are ranked through their share price drops.
15 Worst Performing Growth Stocks in 2023
15. NerdWallet, Inc. (NASDAQ:NRDS)
Share Price Drop In 2023: 12.55%
Price to Earnings Ratio: 285
NerdWallet, Inc. (NASDAQ:NRDS) is a financial technology company with different business segments such as a financial marketplace and education. High interest rates have created troubles for the company as it has seen demand for loans drop and subsequently suffered from dropping sales.
By the end of this year’s second quarter, 11 out of the 910 hedge funds part of Insider Monkey’s database had invested in NerdWallet, Inc. (NASDAQ:NRDS). Out of these, the firm’s largest shareholder is Robert Pohly’s Samlyn Capital since it owns 1.5 million shares that are worth $14.8 million.
NerdWallet, Inc. (NASDAQ:NRDS) joins National Vision Holdings, Inc. (NASDAQ:EYE), Clearfield, Inc. (NASDAQ:CLFD), and HomeStreet, Inc. (NASDAQ:HMST). in our list of the worst performing growth stocks in 2023.
14. Sterling Check Corp. (NASDAQ:STER)
Share Price Drop In 2023: 16.9%
Price to Earnings Ratio: 447
Sterling Check Corp. (NASDAQ:STER) is a sizeable software company that lets employers conduct background checks. A slowdown in the hiring sector led to the firm’s revenue drop annually during its second quarter but its earnings per share (EPS) beat analyst estimates.
As of June 2023, 16 hedge funds among the 910 polled by Insider Monkey were the firm’s shareholders. Sterling Check Corp. (NASDAQ:STER)’s biggest investor is Ken Griffin’s Citadel Investment Group through a stake worth $10 million.
13. BlackLine, Inc. (NASDAQ:BL)
Share Price Drop In 2023: 17.31%
Price to Earnings Ratio: 353.06
BlackLine, Inc. (NASDAQ:BL) is a financial accounting software company that streamlines business accounting and other operations. Like Sterling, its stability is also linked to a growth in employment and the ability of businesses to afford technological transformations.
Insider Monkey took a look at 910 hedge funds for their first quarter of 2023 shareholdings and discovered 23 BlackLine, Inc. (NASDAQ:BL) investors. Douglas Dossey and Arthur Young’s Tensile Capital is the largest stakeholder out of these since it owns $33 million worth of shares.
12. Avantax, Inc. (NASDAQ:AVTA)
Share Price Drop In 2023: 21.27%
Price to Earnings Ratio: 359.98
Avantax, Inc. (NASDAQ:AVTA) is a financial services and wealth management firm that caters to the needs of private and organizational customers. Its stock has seen sizeable drops twice this year, with the first drop coming in April and the second in August.
By the end of this year’s June quarter, 15 out of the 910 hedge funds profiled by Insider Monkey had held a stake in the company. Out of these, Avantax, Inc. (NASDAQ:AVTA)’s biggest shareholder is Claus Moller’s P2 Capital Partners through a stake worth $51 million.
11. Mesa Laboratories, Inc. (NASDAQ:MLAB)
Share Price Drop In 2023: 28.73%
Price to Earnings Ratio: 384.03
Mesa Laboratories, Inc. (NASDAQ:MLAB) is an engineering and scientific equipment provider. It has struggled to financially perform during the trailing year, by having missed analyst EPS estimates in three out of its four latest quarters. The most recent share price drops came in May as its fourth quarter and latest fiscal year revenues dropped by double digits.
13 out of the 910 hedge funds part of Insider Monkey’s Q2 2023 database were Mesa Laboratories, Inc. (NASDAQ:MLAB)’s investors. Small cap investor Chuck Royce’s Royce & Associates is the largest hedge fund stakeholder since it owns 159,609 shares that are worth $20.5 million.
10. V.F. Corporation (NYSE:VFC)
Share Price Drop In 2023: 32.23%
Price to Earnings Ratio: 63.97
V.F. Corporation (NYSE:VFC) is an American textile design and distributor. It is a discretionary spending firm, which means that sales are dependent on consumer spending power. Despite this, the firm has maintained or beaten market profitability market expectations in recent quarters, and only Q2 2023 saw it miss EPS estimates.
During the same time period, 26 hedge funds among the 910 surveyed by Insider Monkey had held a stake in the company. V.F. Corporation (NYSE:VFC)’s biggest shareholder among these is Robert Joseph Caruso’s Select Equity Group since it owns $77 million worth of shares.
9. Chewy, Inc. (NYSE:CHWY)
Share Price Drop In 2023: 35.17%
Price to Earnings Ratio: 196.5
Chewy, Inc. (NYSE:CHWY) is a pet food retailer headquartered in Florida. Despite inflationary troubles in America, the firm has managed to grow revenue and maintain cash flow health.
Insider Monkey dug through 910 hedge funds for their June quarter of 2023 shareholdings and discovered that 29 had bought and owned Chewy, Inc. (NYSE:CHWY)’s shares. Out of these, the firm’s largest investor is Paul Marshall and Ian Wace’s Marshall Wace LLP due to its $135 million stake.
8. ZoomInfo Technologies Inc. (NASDAQ:ZI)
Share Price Drop In 2023: 40.25%
Price to Earnings Ratio: 57.45
ZoomInfo Technologies Inc. (NASDAQ:ZI) is a software company that provides marketing products. Its earnings have remained robust despite high inflation and high interest rates, which often lead to businesses tightening their budgets. A recent example of this trend is Netflix’s decision to shift some of its cloud computing operations to data center as it found that the previous reliance on Amazon’s AWS was proving to be a bit expensive.
As of June 2023, 42 hedge funds out of the 910 surveyed by Insider Monkey had held a stake in the company. ZoomInfo Technologies Inc. (NASDAQ:ZI)s biggest stakeholder is Mick Hellman’s HMI Capital through a $274 million investment.
7. Agiliti, Inc. (NYSE:AGTI)
Share Price Drop In 2023: 52.49%
Price to Earnings Ratio: 274
Agiliti, Inc. (NYSE:AGTI) is an equipment management firm that targets the healthcare sector. It allows hospitals and other healthcare establishments to manage their equipment needs by providing products such as bed frames, wheelchairs, and ventilators. The firm acts as a conduit between hospitals and equipment suppliers, enabling the former to tailor their workflows by providing products during periods with high demand. Seems like Wall Street has been worried about a share price drop for the stock for quite some time, since Citigroup, Bank of America, and Morgan Stanley all reduced ratings to Underperform, Underweight, or Neutral in August and September.
For their second quarter of 2023 shareholdings, three hedge funds among the 910 part of Insider Monkey’s research were Agiliti, Inc. (NYSE:AGTI)’s investors. Out of these, the largest investor is Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management since it owns 469,277 shares that are worth $7.7 million.
6. Enphase Energy, Inc. (NASDAQ:ENPH)
Share Price Drop In 2023: 52.54%
Price to Earnings Ratio: 30.79
Enphase Energy, Inc. (NASDAQ:ENPH) sells hardware products to firms that provide solar power equipment. Despite a 52.54% share price drop this year, it has beaten analyst EPS estimates in all four of its latest quarters. However, the share price has suffered due to a variety of factors such as a late July announcement that saw the firm reduce revenue expectations as it decided to reduce shipments to clear channel glut.
50 out of the 910 hedge funds part of Insider Monkey’s Q2 2023 database had bought the firm’s shares. Enphase Energy, Inc. (NASDAQ:ENPH)’s biggest hedge fund shareholder is Philippe Laffont’s Coatue Management through a $102 million stake.
Clearfield, Inc. (NASDAQ:CLFD), Enphase Energy, Inc. (NASDAQ:ENPH), National Vision Holdings, Inc. (NASDAQ:EYE), and HomeStreet, Inc. (NASDAQ:HMST). are some of the worst performing growth stocks in 2023.
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Disclosure: None. 15 Worst Performing Growth Stocks in 2023 is originally published on Insider Monkey.
