In this video, Chuck Carnevale, co-founder of FAST Graphs, aka Mr. Valuation explores 14 growth stocks that he believes offer strong growth potential at reasonable valuations. While finding quality growth stocks has become more challenging, opportunities still exist for investors willing to focus on fundamentals, valuation, and future earnings growth.
Chuck defines a true growth stock as a company capable of growing earnings at approximately 15% or more annually. For faster-growing companies, he discusses the relationship between the P/E ratio and earnings growth rate, including the importance of the PEG ratio. The stocks featured generally have PEG ratios below 1, suggesting their valuations may be attractive relative to their expected growth rates.
Using FAST Graphs, Chuck examines historical earnings growth, current valuation, analyst forecasts, financial strength, debt levels, and analyst forecasting accuracy. The companies highlighted span several industries, including financial services, technology, software, telecommunications, payment processing, construction and engineering, and asset management.
Among the companies discussed are Affiliated Managers Group, Broadcom, Global Payments, KKR, MasTec, NVIDIA, Oracle, Raymond James Financial, Charles Schwab, T-Mobile, Voya Financial, Western Digital, and Vertex. Each presents a different combination of growth potential, valuation, financial strength, and risk.
Several AI-related opportunities stand out. Broadcom is expected by analysts to deliver significant earnings growth, while NVIDIA remains one of the strongest pure growth stories tied to artificial intelligence. Western Digital also offers substantial projected growth but has historically been more cyclical.
Chuck also takes a closer look at Vertex, a tax compliance software company that has recently moved closer to fair value after years of higher valuation. Its recurring, “sticky” business model and growing cash flow make it particularly interesting, although operating leverage and dilution remain risks.
The central message is that growth investing can produce exceptional long-term returns, but higher growth also comes with higher risk. Investors should never rely solely on forecasts or valuation metrics. Continuous research and due diligence are especially important because even small disappointments can create significant volatility in high-growth stocks.
Disclosure: Long AVGO, GPN, NVDA, ORCL, RUF
Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.
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