Overwhelmed with negative economic news, investors are unsure whether to buy or sell growth stocks. Is it time to take a contrarian approach and buy growth stocks before the bull market returns?
The following seven growth stocks defy the basic rule in investing that growth stocks tend to trade at lofty prices. They do however demonstrate growth in earnings per share, sales, and operating income, and free cash flow and valuations can be attractive. Forget the P/E ratios at triple digits that are absurd! Growth stocks can trade at attractive valuations, which is the best of both growth and value investment styles.
Here are the best growth stocks to buy before the bull market returns.
Growth Stocks to Buy Before the Bull Market Returns: Petrobras (PBR)
Petrobras (NYSE:PBR), an oil and gas producer based in Brazil, is up 12% in 2022. The latest news has been very positive as “Petrobras smashed second-quarter profit and margin estimates, boosted by divestments and higher margins in its fuel and natural gas businesses.” Net income of 54.33 billion reais ($10.5 billion) was an increase of 26.8% year-over-year, beating the consensus estimate of 38 billion reais.
There is more good news as Petrobras announced a massive dividend payment of “6.732 reais per share, totaling 87.8 billion reais ($17 billion)” as a result of soaring oil prices.
The firm has experienced revenue growth year-over-year of 60%, and EBITDA growth of 30%.
It is a stock that is trading at a very low P/E ratio of 2.6x.
Arch Resources (ARCH)
Arch Resources (NYSE:ARCH), a firm that makes high-quality metallurgical products for the global steel industry, has announced its second-quarter 2002 financial results. They were great.
Some of the highlights were “record net income for a third straight quarter,” “record coking coal realizations and gross coking coal margins” and “a quarterly dividend of $118.7 million, or $6.00 per share.”
When a company announces record net income, you have high odds of a rally — not an immediate one, but rather a smooth one over time. A look at the growth metrics for ARCH stock is very bullish with revenue growth of 118% and EBITDA growth of 1,033%.
The 1-year estimate of $196 signals upside potential of 54%.
Growth Stocks to Buy Before the Bull Market Returns: Cenovus Energy (CVE)
Cenovus Energy (NYSE:CVE) is another crude oil and natural gas producer that sells its products in Canada, the U.S., and in the Pacific region. It has seen its shares rally more than 20% in 2022. The reason is soaring energy prices.
The second-quarter 2022 financial results were very strong as the company reported “net earnings of $2.4 billion in the second quarter, compared with $1.6 billion in the first quarter.”
On top of that Cenovus Energy has delivered growth for its stock price as it returned more than $1 billion to its shareholders through share buybacks. The revenue growth (FWD) of 76% and operating cash flow growth (FWD) of 236% indicates there is growth ahead.
Crescent Point Energy (CPG)
The stock has gained nearly 10% in 2022 and is experiencing ongoing growth and momentum. The firm reported year-over-year cash flow from operating activities of 529.6 million CAD versus 285.5 million CAD a year ago and generated about 380 million CAD of excess cash flow in the second quarter, allowing for higher returns to its shareholders.
There are many things notable about its growth. The EBITDA growth (FWD) of 126% and EPS growth of 71% are both exceptionally strong and very positive for the stock.
Growth Stocks to Buy Before the Bull Market Returns: Sociedad Química y Minera de Chile (SQM)
Sociedad Química y Minera de Chile (NYSE:SQM) is a producer of “specialty plant nutrients, iodine, and its derivatives, lithium and its derivatives, potassium chloride and sulfate, industrial chemicals, and other products and services.”
The EBITDA growth (FWD) is 108% and its return on equity (or ROE) growth is 112%.
The levered FCF growth of 2,111% is outstanding, and if you add the fact that the stock has a forward dividend yield of 11% and is trading at a trailing P/E ratio of 12.9x after a rally of 86% in 2022, then it is a clear bargain now. Investors should buy SQM stock on any dips.
Alliance Resource Partners (ARLP)
Alliance Resource Partners (NASDAQ:ARLP) is a “diversified natural resource company, that produces and markets coal primarily to utilities and industrial users in the United States.”
The firm is in the Thermal Coal industry, and if you think there can be growth in any industry as long companies have an edge in their business model, you are very correct. ARLP stock has rallied 78% in 2022 despite a weak first-quarter with a miss on EPS and on revenue.
The revenue growth year-over-year is 40% and the revenue growth (FWD) is 27%. The EPS diluted growth (FWD) is 207% which is very high. All these figures show a lot of growth in exactly what matters for a stock to move higher.
Growth Stocks to Buy Before the Bull Market Returns: Cross Country Healthcare (CCRN)
The stock is flat in 2022, but this can change later this year. The numbers for its growth speak for themselves.
The revenue growth (FWD) is 37%, the EBIT growth (FWD) is 113% and the operating cash flow growth (FWD) is 120%.
These figures fully support the 1-year estimate of $42.67, representing upside potential of 54%. There can be growth found in many sectors and industries, but the key is to pick the winners from a wide spectrum of stocks. CCRN stock seems to be a clear winner with lots of growth and a valuation that is too attractive now.
On the date of publication, Stavros Georgiadis, CFA did not have (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.