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3 High-Growth Stocks to Buy That are Trading at a P/E of Less Than 20

Companies with catalysts that will translate into growth acceleration and robust cash flow upside

A combination of high-growth low PE stocks can be a game-changer for portfolio returns. Looking for stocks that match this criterion becomes more relevant at a time when the index is near all-time highs. There are several stocks that are trading at stretched valuations.

The market focus is therefore likely to shift to sectors and stocks that have remained subdued. Once in the limelight, these growth stocks can deliver robust returns at the blink of an eye. The focus of this column is on growth stocks that trade at a P/E of less than 20.

It’s important to note that growth stocks trading at a low P/E does not necessarily imply that business fundamentals are poor. There can be temporary headwinds that depresses the valuation of a good company.

In my view, the ideas discussed are worth considering with an investment horizon of 24 to 36 months. During this period, I would not be surprised if these stocks deliver 100% to 200% returns. Let’s discuss the factors to be bullish.

Miniso Group (MNSO)

red Miniso (MNSO) sign glowing at night

Source: shutterstock.com/Hendrick Wu

Miniso Group (NYSE:MNSO) has remained sideways in the last 12 months. This seems like a good opportunity to accumulate the undervalued growth stock before a breakout. To put things into perspective, MNSO stock trades at a forward P/E of 14.5 and offers an attractive dividend yield of 2.26%.

For Q1 2024, the lifestyle retailer reported healthy revenue growth of 26% on a year-on-year basis to $515.7 million. For the same period, adjusted EBITDA increased by 36.7% to $133.7 million. Stellar top-line growth has been associated with EBITDA margin expansion. 

It’s also worth noting that Miniso has ambitious growth plans. The retailer expects to open 900 to 1,100 new stores annually between 2024 and 2028. This will help in sustaining the growth momentum with Miniso guiding for revenue CAGR of over 20% during this period.

Another point to note is that Miniso has been growing at a healthy pace amidst macroeconomic headwinds. With expansionary monetary policies likely globally, there is a strong case for growth acceleration.

Borr Drilling (BORR)

Rise in gasoline prices concept with double exposure of digital screen with financial chart graphs and oil pumps on a field. Oil prices and oil price predictions

Source: Golden Dayz / Shutterstock.com

Borr Drilling (NYSE:BORR) is another high-growth low PE stock to buy for healthy returns. With oil remaining subdued, BORR stock has been sideways to lower in the last 12 months. However, at a forward P/E of 11.2, the offshore drilling services provider looks attractively valued.

I must add here that for Q1 2024, Borr announced a dividend of 10 cents per share. This implies a dividend growth of 100% and underscores the company’s confidence on earnings growth and cash flow upside.

For Q1 2024, Borr Drilling reported an order intake of $300 million. With oil likely to trend higher on rate cuts, I expect the order intake to remain robust. Currently, Borr has 93% contract coverage for 2024 and 71% for 2025. This provides clear revenue and cash flow visibility for the next 18 months.

Last year, Borr reported an adjusted EBITDA of $351 million. With an increase in backlog and higher day rates, the company has guided for adjusted EBITDA of $525 million for 2024. As the backlog swells, it’s likely that EBITDA growth will remain robust. This will translate into improvement in key credit metrics.

Riot Platforms (RIOT)

In this photo illustration, the Riot Platforms (RIOT) logo is displayed on a smartphone screen.

Source: rafapress / Shutterstock.com

Riot Platforms (NASDAQ:RIOT) is the most risky bet among the stocks discussed. However, if the execution is right and Bitcoin (BTC-USD) remains in an uptrend, the stock can deliver more than just 2x returns. At a forward P/E of 15.3, RIOT stock looks deeply undervalued.

In terms of balance sheet fundamentals, Riot looks attractive. The Bitcoin miner has zero-debt and a liquidity buffer of $1.3 billion (including digital assets) as of Q1 2024. With high financial flexibility, the company is positioned to make aggressive investments. Based on capital investment targets, Riot is fully financed through 2025.

As of Q1 2024, Riot reported hash rate capacity of 12.5EH/s. The miner expects to increase capacity to 31.5EH/s by the end of the year. The long-term target is to boost capacity to 100EH/s by 2027. This provides visibility for sustained revenue and EBITDA growth. At the same time, as operating cash flows swell, internal financing will suffice for capital investments beyond 2025.

On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

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