Exploring Affordable Growth Stocks That Can Boost Your Portfolio

Navigating Market Volatility for Investment Opportunities

In the ever-changing landscape of the stock market, periods of volatility can present unique opportunities for investors. When stock prices drop, it often leads to the chance of finding high-quality companies whose shares are trading at reduced values. For those with a long-term buy-and-hold investment approach, this can be an excellent time to add those stocks to their portfolios, especially while other investors may hesitate.

However, it's crucial to understand that not all declining stocks become better investment prospects simply due to their lower prices. Sometimes, declines are justified, driven by valid concerns about their business performance. Other times, the market may undervalue a company's worth, often influenced by prevailing negative sentiments despite evidence of its potential for strong long-term performance. Hence, the challenge lies in discerning which stocks are truly undervalued.

Investment Alignment and Research

Every stock purchase should correspond with your overall investment strategy. It is vital to invest in businesses you genuinely believe in, and understand from both operational and financial viewpoints. By focusing on what you know and trust, you can better manage risks while aiming to achieve your financial goals.

If you are exploring budget-friendly growth stocks worth considering this month, here are two significant options that stand out.

1. Hims & Hers Health

Hims & Hers Health (NYSE: HIMS) is making strides in the telehealth sector, riding high on the increasing consumer demand for accessible healthcare solutions. Their innovative subscription model provides customers with continuous access to a broad network of licensed medical professionals and delivers prescriptions conveniently to their homes.

The company collaborates with specialists focusing on various health issues, including sexual wellness, weight management, and mental health, as well as dermatology and hair regrowth. Remarkably, the stock has soared over 110% since the start of 2024, trading under $20 per share.

The growth drivers propelling Hims & Hers include strong interest in their new GLP-1 drugs, outstanding revenue increases, and a positive shift towards profitability. In fact, they reported profitability for the first time this year, and their price-to-sales (P/S) ratio currently sits around 4, a reasonable metric for a company experiencing rapid expansion.

Financial Highlights

During the second quarter, Hims & Hers Health achieved revenue of approximately $316 million—an impressive 52% increase from the previous year. With a net income of $13.3 million and adjusted earnings reaching $39.3 million, the business shows significant promise. Their subscriber base has skyrocketed to 1.9 million, boasting a year-over-year growth of 43%.

Furthermore, it’s essential to highlight that Hims & Hers is generating positive free cash flow, surpassing $48 million in the second quarter of 2024 alone.

2. Upstart

Upstart (NASDAQ: UPST) has experienced noteworthy fluctuations in its stock price over the last few years, largely influenced by external economic conditions. Currently, shares trade at around $43, with a P/S ratio of 6.8, which may seem high compared to some alternatives. Despite the volatility, Upstart’s stock has climbed nearly 50% in the past year, although it remains close to 90% below its peak of $401 reached in October 2021.

The core investment argument for Upstart hinges on the expectation that as interest rates gradually decrease, opportunities for recovery may emerge. Since its public debut in 2020, the company has reported a 42% increase in revenue year over year, approaching $233.4 million, with a net income of $6 million recorded in their first year.

Adapting to Economic Changes

Upstart operates a platform that employs artificial intelligence and machine learning to enhance lending decisions significantly. Instead of relying solely on traditional FICO scores, Upstart evaluates over 1,600 unique factors related to each applicant's credit risk, allowing for more tailored lending solutions.

Despite challenges posed by higher interest rates and related financial dynamics, Upstart has shown remarkable resilience. Recently, the Federal Reserve’s actions hint at future interest rate cuts, which could provide relief to businesses like Upstart, enabling a resurgence in lending activity. In the second quarter, revenue reached approximately $128 million, with automation of loan approvals hitting a record-breaking 91%.

Investment Considerations

Before making investment decisions regarding either Hims & Hers Health or Upstart, it's crucial to do thorough research and consider how each aligns with your specific investment strategy. Each company presents unique opportunities and challenges, making it essential to evaluate their long-term growth prospects along with your risk tolerance.

Frequently Asked Questions

What are growth stocks?

Growth stocks are shares in companies that are expected to grow at an above-average rate compared to their industry or the broader market, typically reinvesting earnings into business expansion.

Why should I consider Hims & Hers Health for investment?

Hims & Hers Health offers innovative telehealth solutions, demonstrating strong revenue growth and path to profitability, making it an appealing investment opportunity in the healthcare space.

What makes Upstart a potential investment?

Upstart leverages AI in lending with a scalable business model, showing signs of recovery as macroeconomic conditions improve, appealing to investors looking for innovative financial solutions.

How do I evaluate if a stock is a good buy?

Consider analyzing the company’s financial health, market position, growth potential, and price metrics like price-to-earnings or price-to-sales ratios compared to its peers.

Should I invest based on short-term stock performance?

It's generally advisable to focus on long-term fundamentals and not be swayed by short-term volatility, as markets can fluctuate for various reasons that don't reflect a company's true value.

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Disclaimer: The content of this article is solely for general informational purposes only; it does not represent legal, financial, or investment advice. Investors Hangout does not offer financial advice; the author is not a licensed financial advisor. Consult a qualified advisor before making any financial or investment decisions based on this article. The author's interpretation of publicly available data shapes the opinions presented here; as a result, they should not be taken as advice to purchase, sell, or hold any securities mentioned or any other investments. The author does not guarantee the accuracy, completeness, or timeliness of any material, providing it "as is." Information and market conditions may change; past performance is not indicative of future outcomes. If any of the material offered here is inaccurate, please contact us for corrections.