Hidden Gems in the Stock Market: Growth Stocks Currently on Sale
When volatility hits the stock market, it can cloud your judgment as an investor. A steep decline in a stock's price might raise alarms, but savvy investors know it often signals an opportunity to buy quality stocks at a bargain. Below, we delve into two promising growth stocks that have taken a hit recently but show strong fundamentals and future potential.
1. DexCom (NASDAQ: DXCM)
Overview:
DexCom, a leader in continuous glucose monitoring (CGM) devices, is facing some major headwinds. Its stock has plummeted by around 45% since the beginning of 2024. However, this sharp drop could be more about short-term reactions than long-term fundamentals.
Growth Prospects:
DexCom dominates a growing market with its innovative CGM devices, essential for both diabetics and pre-diabetics to manage blood sugar levels. Despite recent troubles due to the rising popularity of GLP-1 drugs for diabetes and chronic weight management, CGMs like those offered by DexCom remain indispensable. These monitoring devices provide real-time glucose levels—an aspect the drugs cannot replace.
Financial Health:
DexCom's financial metrics also tell a compelling story:
- Q2 2024 Revenue: Up 15% YoY to $1 billion.
- Net Income: Increased by 24% to $143.5 million.
- U.S. Revenue Growth: 19% YoY.
- Cash Reserves: $3.1 billion, with an unused revolving-credit facility.
New Innovations:
The launch of Stelo, the first over-the-counter glucose biosensor, represents a monumental step. This device opens up DexCom's market to 125 million Americans with type 2 diabetes who don't require insulin, or are pre-diabetic. With flexible payment options and up to a 15-day wear time, Stelo is poised for massive market penetration.
Conclusion:
Despite temporary setbacks, DexCom continues to show robust growth and financial health. With a vast untapped market and innovative product line, the stock may still represent a compelling buy for a well-rounded portfolio.
2. Bill Holdings (NYSE: BILL)
Overview:
Bill Holdings, a provider of financial-automation software for small-to-midsize businesses, has seen its stock decline by about 32% in 2024. This drop isn't due to any alarming financial missteps but rather external market volatility impacting growth stocks.
Business Model:
Bill Holdings offers essential back-office services ranging from accounts payable to receivable and invoice management, targeting a vast market of small and medium-sized enterprises (SMEs). Revenue streams include:
- Subscription Fees: Based on annual or monthly billing.
- Transaction Fees: Generated through various payment channels like ACH and card payments.
Financial Performance:
In fiscal 2024, Bill Holdings demonstrated strong growth:
- Total Revenue: Rose by 22% YoY to $1.3 billion.
- Core Revenue: Increased 19% YoY to $1.1 billion.
- Gross Profit: $1.1 billion.
- Free Cash Flow: Up 65%, totalling $258 million.
Market Opportunity:
Management estimates a total addressable market of 70 million small businesses globally and $344 billion in software spending among SMEs. This indicates a significant runway for growth despite broader economic challenges.
Conclusion:
With a solid financial performance and a growing market, Bill Holdings appears well-positioned for future success. The discounted stock price could provide an attractive entry point for long-term investors focused on quality growth stocks.
Final Thoughts
Both DexCom and Bill Holdings present strong cases for investment despite recent stock declines. By focusing on solid fundamentals and long-term growth potential, these stocks could offer substantial returns for patient investors.
Disclaimer: This analysis is intended for informational purposes and should not be considered as financial advice. Always conduct your own research or consult a financial advisor before making investment decisions.
