Growth stocks have been on a tear over the past year and a half – that’s if you put them all in the same basket. If you invested in Big Tech, AI, or SaaS, you’d likely be sitting on some massive gains right now. However, while the rising tide has lifted many boats, not all growth stocks have been rewarded equally.
Many incredible businesses with tremendous growth potential are still trading at very discounted valuations, despite strong operational performance. Their core fundamentals have not only recovered from the downturn but are exceeding pre-pandemic levels in many cases. Yet, Wall Street has failed to reward them accordingly.
At the same time, a lot of these growth stocks are nearing or already achieving profitability, with profits expected to expand rapidly over the coming years. This presents a compelling opportunity to snap up shares of strong companies while they are still under the radar. Once the market notices their execution, their stocks could take off in a big way. Let’s take a look!
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As someone who has been following Data Storage Corporation (NASDAQ:DTST) closely, I can confidently say that this stock continues to deliver impressive returns. Since I first featured DTST, the company has nearly doubled in value. In the past year alone we’ve seen DTST rise a whopping 232%, with additional gains of 47% just last month.
Of course, maintaining such torrid growth rates going forward is no sure thing. However, DTST’s rising visibility provides clues to further catalysts. For years this company flew under the radar, but new contracts with major cloud and AI players could thrust them into the spotlight. Data Storage Corporation’s niche focus on data management solutions positions them to assist the escalating needs of tech giants. With few comparable options at the penny stock level delivering DTST’s profitable results and minimal dilution, this story remains compelling.
Landing additional large contracts will go a long way in sustaining the multi-bagger returns investors have enjoyed. While past performance offers no guarantee of alike gains, Data Storage Corporation’s technical know-how and strong growth trajectory leave room for further surprises to the upside. At its current valuation, any such developments could multiply the rewards for patient shareholders.
Fuel Tech Inc. (FTEK)
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While Fuel Tech (NASDAQ:FTEK) may not scream “value play,” I still view its quality prospects favorably among penny stocks. Rather than chasing cheap valuations, my priority lies in identifying small companies poised for explosive growth. Fuel Tech fits this profile through exposure to robust environmental tech demand.
To be sure, profits remain near breakeven for now. But the market typically rewards execution, not accounting results alone. Analyst estimates foresee accelerating 20%-plus annual revenue gains, with minimal ongoing losses that pose little threat to Fuel Tech’s robust balance sheet. As the world transitions toward emission-curbing solutions, the company is well-positioned to complement industry adoption.
Some investors may balk at the stock’s current unprofitability. I understand the concern. However, given reasonable profitability expectations starting in 2027, it seems early criticism disregards Fuel Tech’s long runway for cash flow expansion. Quality often commands its worth—if guidance proves accurate, shareholders stand to enjoy the rewards of foresight. Total losses until it hits profitability is expected to be less than $10 million. The company has $28.3 million in cash and negligible debt.
Applied Digital Corporation (APLD)
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As a provider of data center solutions including crypto mining operations, Applied Digital Corporation (NASDAQ:APLD) offers a unique angle on the thriving technology industry. Despite doubts about cryptocurrency’s influence, I see APLD’s exposure ultimately enhancing long-term prospects.
Blockchain applications and associated mining demand will likely intensify alongside crypto’s patented volatility. As the network effects strengthen, miners require ever-greater infrastructure to satisfy increasing hash rates. Simultaneously, AI and other digital innovations spur massive data needs—all benefiting APLD.
While some dismiss crypto ties as posing risk, the cyclical nature of currencies creates stable opportunities. Miners rapidly build new fleets during downcycles in preparation for the next rally, bolstering Applied Digital’s utilization and potential revenue quadrupling.
At just 6x estimated 2025 earnings, APLD sits at an attractive entry point before its progress resonates more broadly. Multi-bagger gains could ensue as business relationships in high-growth industries take the company’s valuation to new heights.
BlackSky Technology Inc (BKSY)
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Military and civic-oriented companies alike demand high-quality intelligence, and BlackSky (NYSE:BKSY) aims to deliver through its growing constellation of low Earth orbit satellites. Unlike many fledgling space firms hemorrhaging funds, BlackSky boasts relatively sound financials – traits I find reassuring in such a speculative industry.
Analyst projections citing profitability by 2026 and sales doubling 2024 to 2026 point to BlackSky’s maturing business model. While some may doubt multi-million dollar contracts materialize as planned, the company’s $52 million cash reserves provide valuable wiggle room through interim losses. With shares anchored near $1.50 for over two years, the downside appears limited should milestones fail to meet optimism.
At the same time, BlackSky holds significant strategic interests in the commercial and defense sectors. As geopolitical tensions rise globally, demand for real-time surveillance only grows. If BlackSky succeeds in capturing a sizable customer base as forecasted, $3.50 price targets could prove conservative. For adventurous investors, the risk-reward profile makes BlackSky worth a look at current valuations.
Hive Blockchain Technologies (HIVE)
HIVE Blockchain Technologies logo over a map of the world. HIVE stock.
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Bitcoin’s (BTC-USD) climb past $71,000 highlights mining firms’ under-appreciated upside. While some dismiss crypto on principle, Hive Digital (NASDAQ:HIVE) offers a reliable way to leverage Bitcoin’s momentum without direct ownership. Miners like HIVE stockpiled currency during crypto winter, arming themselves for explosive gains as we enter the bull season.
Expanding mining capacity of over 4 exahashes since last month bodes well for HIVE’s 200 Bitcoin February haul. With 10% higher Bitcoin reserves reaching 2,131 coins, HIVE readies itself as blocking rewards halve and difficulty rises. Many forecast mining profits squeeze, but firms prepared for this event years ago.
Miners hold a BTC stash that swells with Bitcoin’s tide. With the tide now flooding, mining shares appear primed to synchronize. HIVE looks well-positioned to translate growing hash power into soaring share price.
Forian Inc. (FORA)
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Forian (NASDAQ:FORA) is an under-the-radar data analytics and SaaS play. The market has yet to recognize FORA’s hidden value. Likely overshadowed in obscurity with its sub-$90 million cap, FORA nonetheless maintains stable growth finances that merit a closer look.
The company had $28 million in revenue and $26 million in losses in 2022. It has been improving margins greatly since then. Analysts expect 6 cents in EPS for 2023 followed by some more losses near breakeven that can be handled with its cash balance. Meanwhile, it is expected to post 15% annual revenue growth going forward as operations stabilize post-pandemic. The company’s $49 million cash pile can easily sustain losses until it hits profitability.
Undoubtedly, wider profits remain years away. However, as artificial intelligence reshapes business, demand will follow. Growth is on the mend and Forian looks like a big SaaS player in the making.
Bit Digital Inc (BTBT)
Bit Digital (BTBT stock): several rows of processors in a crypto mining farm.
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As I have noted previously, Bitcoin’s latest surge has energized crypto markets. However, mining stocks have curiously lagged the recovery. Bit Digital (NASDAQ:BTBT) is one of them and it looks primed to play catch up should sentiment heal. With over $160 million in digital holdings (as of writing) and $38 million in fiat reserves, BTBT fields ample firepower to weather ongoing volatility.
It mined 128.7 Bitcoin in February, and Bit Digital has been aggressively expanding its fleet along with other miners in anticipation of the halving.
All that remains is restoring traders’ faith in miners’ potential. As Bitcoin matures into a $1.5 trillion asset and likely beyond, mining firms facilitating the network gain recognition. Their growing stash of BTC won’t be discounted forever.
On the date of publication, Omor Ibne Ehsan 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.
Omor Ibne Ehsan is a writer at InvestorPlace. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as cryptocurrencies and penny stocks. You can follow him on LinkedIn.
