The end of the year is fast approaching and optimism on Wall Street is increasing. Inflation has fallen back to levels below 3%, the Federal Reserve is cutting rates again, and inflation has fallen again S&P500 is up 28% year to date.
Will the market continue its rise next year? Will it fall? There’s no way to know for sure. So investors should stick to the simple, smart strategy of buying reasonably valued stocks of companies with great potential.
Do you miss the morning spoon? Breakfast news delivers it all in one fast, silly and free daily newsletter. Register for free »
Since valuations in this market look inflated, especially for growth stocks, there could soon be a run on safe stocks and dividend stocks. But you can still find reasonably valued growth stocks to buy now and hold for the long term. Here are five great options.
Almost everyone does at least some of their banking online these days, and banks with easy-to-use digital services are gaining market share. SoFi technologies (NASDAQ: SOFI) has a complete digital financial app that is rapidly attracting new customers, and its strategy of cross-selling a wide range of solutions is generating greater engagement from those customers.
The results speak for themselves. Revenue rose 30% year-over-year in the third quarter and net profit was $58 million – a big improvement from the $276 million loss in the year-ago period. The third quarter was indeed the fourth quarter in a row with a positive net result.
The power lies with the members. In that quarter alone, SoFi added 756,000 new members. The main target groups are students and young professionals: people with long-term profit growth potential and whose banking needs will increase over time.
SoFi continues to expand and scale its platform, and will likely continue to do so into 2025 and beyond. SoFi stock trades at a price-to-earnings ratio of 66, which isn’t cheap, but it could be a reasonable valuation for a standout growth stock.
Now Holdings (NYSE: NOW) has a similar model to SoFi’s, but operates in Brazil, Mexico and Colombia. It is already one of the largest banks in Brazil, serving 56% of the adult population, but it is adding millions of customers to its markets every quarter.
The growth story has been nothing short of incredible. Revenue rose 56% year over year to $2.9 billion in the third quarter, and net profit more than doubled to $553 million. It added 5.2 million customers for a total of 109.7 million, up 23% from the same period last year.
Although Nu stock has been rising for a long time, it has recently taken a step back amid investor concerns about continued inflation and economic volatility in Brazil. That’s right: Nu’s results have been affected in several ways by conditions there, including net interest margin compression and slower growth in average revenue per active customer.
But these are short-term concerns, and Nu could rebound in 2025 and be a top stock to own in the long term. Nu shares trade at a price-to-earnings ratio of less than 20, which is a bargain.
Lemonade (NYSE:LMND) went from market darling to a stock that investors loved to hate. But in recent times, the country has once again found its way into the good graces of the market by showing robust growth and an improving loss ratio.
Current premiums – the typical revenue measure for insurance companies – rose 24% year-on-year in the third quarter, while the number of customers rose 17% to 2.3 million, and premiums per customer rose 6%. Investors waited for the company’s loss ratio to improve, and it did, down 10 percentage points year over year, a remarkable achievement. Lemonade is still reporting net losses, but as its loss ratio decreases and profitability improves, the stock should continue to rise.
Investors may be hesitant to buy a stock that’s already up 191% this year, but Lemonade ended up more than 90% lower than its peak in 2024, so there’s plenty of room for further gains. Lemonade is just beginning its journey and has a technological edge over older insurers. The stock price could continue to rise into 2025, and it could be a phenomenal investment for years to come.
Lemonade stock trades at a price-to-sales ratio of 6.7, which isn’t unreasonable given its potential.
Elven beauty (NYSE: ELF) is perhaps the fastest growing cosmetics company today. It is gaining market share in the makeup and skin care markets, generating loyalty and sales for its low-priced but trendy products.
Sales increased by 40% year-on-year in the third quarter. That’s impressive in itself, but even more so considering it’s been accomplished at a time when many industry veterans are struggling. Shoppers generally reduce unnecessary purchases, and when they do need cosmetics, many turn to cheaper alternatives.
Elf reports high growth and is also profitable. Net profit is muted as the company tries to get the word out about its products in a challenging environment, but profits are still positive.
Elf is building its brand and developing strong relationships with its customers. It presents big opportunities as it challenges the leaders in every category, and 2025 could be a big recovery year. The stock trades at a reasonable forward of 32 times one-year earnings.
Rotate group (NYSE: RVLV) is not yet a well-known company outside the fashion world. But it is taking market share from the apparel leaders and returning to growth after a few quarters of struggling with inflation. Sales increased by 10% in the third quarter and net income increased by 238%.
The company is completely online and uses artificial intelligence throughout the organization. It works with influencers and social media celebrities to get its high fashion items in front of dedicated customers, and it has continued to acquire new active customers despite a tough consumer discretionary environment.
Revolve shares are bouncing back after a tough year and are well positioned to continue their rise into 2025 and beyond. It trades at a cheap price-to-sales ratio of 2.4.
Have you ever felt like you missed the boat on buying the most successful stocks? Then you would like to hear this.
On rare occasions, our expert team of analysts provides a “Double Down” Stocks recommendation for companies they think are about to pop. If you’re worried that you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
-
Nvidia: If you had invested $1,000 when we doubled in 2009, you would have $350,239!*
-
Apple: If you had invested $1,000 when we doubled in 2008, you would have $46,923!*
-
Netflix: If you had invested $1,000 when we doubled in 2004, you would have $492,562!*
We’re currently issuing ‘Double Down’ warnings for three incredible companies, and another opportunity like this may not happen anytime soon.
See 3 “Double Down” Stocks »
*Stock Advisor returns December 9, 2024
Jennifer Saibil holds positions in Lemonade, Nu Holdings and SoFi Technologies. The Motley Fool holds and recommends positions in Lemonade, Revolve Group, and elf Beauty. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy.
5 Incredible Growth Stocks to Buy for 2025 was originally published by The Motley Fool
