Growth stocks can be great investments. But these are only great investments if the valuation is attractive. In the world of tech stocks, there are many stocks trading at extremely rich prices.
The best growth stocks are names you wouldn’t expect. When looking for cheap growth stocks that can provide superior stock price appreciation, the key is to find proven stocks that are industry leaders.
Today I’ll present five amazing and overlooked growth stocks. All of these stocks have been growing earnings at an impressive rate since 2009, and each is expected to continue growing rapidly. The best part is that these stocks are cheap considering their growth potential.
4 Cheap Growth Stocks On the Rise
Morgan Stanley (NYSE: MS)
Despite many banks being stained by the financial crisis, Morgan Stanley has avoided scandal for the most part. Thanks to its institutional securities franchise, the investment bank’s best performing segment, net revenues have grown by 7% annually over the last five years.
Going forward, Morgan Stanley is expected to grow earnings at over 25% annually for the next five years. However, it’s still trading just below book value and with a P/E to growth ratio that’s only 0.9.
Morgan Stanley also offers a 0.6% dividend yield and it’s only a 15% payout. The company’s balance sheet is clean, with cash equal to 20% of the company’s market capitalization. This leaves plenty of room for increasing its dividend in the future.
Freeport-McMoRan Copper & Gold (NYSE: FCX)
Freeport-McMoRan offers investors the double whammy of investing — income and growth. The world’s largest low-cost molybdenum producer offers investors a dividend yielding 4% and Wall Street expects Freeport to grow earnings at nearly 30% annually over the next five years.
But wait, the story gets even better. Freeport is trading at only 10 times earnings expectations for 2015, putting its PEG ratio at a mere 0.4.
Driving its robust growth expectations is Freeport’s initiative to move beyond the mining space and into the energy sector. Its 2013 acquisitions of Plains Exploration and McMoRan Exploration makes Freeport a force to be reckoned with in the natural resource space. It’s now a copper miner, with oil production (Plains) and natural gas drilling assets (McMoRan).
Continental Resources (NYSE: CLR)
There’s nothing that says growth quite U.S. energy independence. And Continental is one of the best-positioned oil and gas companies in the Bakken Shale. Today Continental is the most active producer in the Bakken.
Like Freeport, Continental is expected to grow earnings at a nearly 30% annualized rate over the next half decade. And even though it looks to be expensive, trading at over thirty times earnings, its PEG is still only 1.1.
Continental aims to grow production by over 30% this year, with a focus on the Bakken. Meanwhile, it’s also looking to other areas, such as Oklahoma, to ensure long-term production growth. Last year it managed to increase proved reserves by almost 40%, a positive when it comes to ensuring oil production remains better than its peers.
Southwest Airlines (NYSE: LUV)
Starting out as a regional airline operator, Southwest has grown to become a formidable competitor to some of the world’s largest airlines. The biggest news of late is that Southwest is now looking to move into international markets. It’ll soon be flying in many new international markets, including Central America and Mexico.
Expected to grow earnings at over 25% annually over the next half decade, its PEG ratio is an enticing 0.9. Southwest has also become the first low-cost airline to pay a dividend. The dividend yield is a modest 0.6%. While that’s not much, it’s far better t other airlines stocks. Given cash covers over 20% of the company’s market capitalization, investors should look for that dividend payout to increase.
Investors consider growth and value investing strategies to be very different. However, it is possible to unearth cheap growth stocks at decent prices. Finding growth stocks that are “on sale” is a great strategy to build wealth.
This article is brought to you courtesy of Marshall Hargrave from Wyatt Research.