The top growth stocks for October include Reata Pharmaceuticals Inc., NVIDIA Corp., and Weatherford International PLC, whose share prices climbed up to 537% in the last year.
Investors look to the SPDR Portfolio S&P 500 Growth ETF (SPYG) as a benchmark for growth stocks as a category. SPYG climbed by 14.8% in the last year while the Russell 1000 Index, which represents the 1,000 top U.S. companies by market capitalization, increased by 16.9%. These figures are as of Sept. 26.
Below are the top three growth stocks based on best value, fastest growth, and the most momentum. All data below is as of Sept. 21.
Best Growth Stocks for Value
Investors subscribing to the value investing strategy focus on companies that they believe to be trading at a price below their true worth. If the price of a stock is below the intrinsic value of a company, value investors believe it may be more likely than other stocks to rise at a rapid rate, bringing the price to a level comparable to the intrinsic value.
Investors often look to a fundamental business metric such as a company’s price-to-earnings (P/E) ratio for a sense of whether a particular stock is good value. The growth stocks in the table below are those with the lowest 12-month trailing P/E ratio out of the ones we considered.
| Best Growth Stocks for Value | |||
|---|---|---|---|
| Price ($) | Market Capitalization (Market Cap) ($B) | 12-Month Trailing P/E Ratio | |
| Spectrum Brand Holdings Inc. (SPB) | 78.65 | 2.8 | 1.8 |
| CNX Resources Corp. (CNX) | 21.92 | 3.5 | 2.3 |
| UBS Group AG (UBS) | 25.07 | 84.1 | 2.5 |
Source: YCharts
- Spectrum Brand Holdings Inc.: This is a home appliances, lawn and garden care, and insect repellent manufacturing company. Spectrum offers products under brands including Black & Decker, Spectracide, and Repel. In the latest quarter, the company completed the sale of its HHI business unit for $4.3 billion.
- CNX Resources Corp.: A natural gas company operating primarily in the Appalachian Basin.
- UBS Group AG: A Swiss investment bank and financial services company. The company recently announced that it plans to fully integrate Credit Suisse by 2024 after agreeing to acquire the rival bank in March of 2023.
Fastest-Growing Growth Stocks
Investopedia ranks companies based on a growth model considering both the most recently quarterly year-over-year (YOY) percentage revenue growth as well as the most recent quarterly YOY earnings per share (EPS) growth. The ranking is weighted 50/50 between these two factors.
Sales and earnings combine to offer a more balanced view of a company’s financial well-being than either of these two factors do independently. Looking at only one of the two leaves rankings susceptible to anomalies such as one-time benefits, tax law changes, or restructuring costs. Companies with either quarterly EPS or revenue growth of 1,000% or more are excluded from our ranking as outliers.
| Fastest-Growing Growth Stocks | ||||
|---|---|---|---|---|
| Price ($) | Market Cap ($B) | EPS Growth (%) | Revenue Growth (%) | |
| SAP SE (SAP) | 131.95 | 157.6 | 971.2 | 7.3 |
| Emerson Electric Co. (EMR) | 98.10 | 56.5 | 957.1 | 13.9 |
| NVIDIA Corp. (NVDA) | 422.22 | 1,074.9 | 853.8 | 101.5 |
Source: YCharts
- SAP SE: A German enterprise software firm offering customer relations management tools. SAP’s cloud business revenue has grown significantly in recent quarters.
- Emerson Electric Co.: A technology company that manufactures products and provides services for the consumer, commercial, and industrial markets.
- NVIDIA: A maker of computer graphics cards, chips, and enterprise software. NVIDIA’s data- center revenue nearly tripled year-over-year for the most recent quarter.
Growth Stocks With the Most Momentum
Momentum investing is a strategy that holds that stocks whose prices have risen faster than the rest of the market are more likely to continue to outperform. The thinking behind this is that these stocks have underlying factors prompting prior outperformance, and unless those factors change, stocks are likely to continue to deliver. As other investors pile on to invest in popular stocks, they help to push the price even higher. Momentum growth stocks below are those with the highest total return over the last year.
| Growth Stocks With the Most Momentum | |||
|---|---|---|---|
| Price ($) | Market Cap ($B) | 12-Month Trailing Total Return (%) | |
| Reata Pharmaceuticals Inc. (RETA) | 172.36 | 6.6 | 536.5 |
| NVIDIA Corp. (NVDA) | 422.22 | 1,074.9 | 225.4 |
| Weatherford International PLC (WFRD) | 90.79 | 6.8 | 195.7 |
| Russell 1000 Index | N/A | N/A | 16.9 |
| SPDR Portfolio S&P 500 Growth ETF (SPYG) | N/A | N/A | 14.8 |
Source: YCharts
- Reata Pharmaceuticals: A biotech company developing drug treatments involved in the regulation of cellular metabolism and inflammation. Reata reported in late July that it would be acquired by Biogen Inc. (BIIB) in a deal valuing Reata at $7.3 billion.
- NVIDIA: See company description above.
- Weatherford International: This is an American-Irish oilfield services company. Revenue and operating income increased both sequentially and YOY in the most recent quarter as the company deployed new safety and operational efficiency technology.
Benefits of Investing in Growth Stocks
Including growth stocks in a portfolio can provide benefits including the potential for capital growth and portfolio diversification.
Capital growth potential: Stocks in high-growth industries or companies that undergo restructuring in order to target new markets have the potential to realize significant capital gains. This rapid growth can increase earnings and boost stock prices, at least over the short term.
Diversification: Growth stocks are an excellent way to diversify a portfolio, as they tend to represent a host of different industries and sectors. If a portfolio has growth stocks representing a broad swath of the market, gains in the information technology sector, for example, can help to offset potential losses from investments in other sectors. Similarly, growth stocks can provide a balance against value stocks, which tend to provide more consistent income but are less likely to experience capital appreciation and rapid growth.
Risks of Investing in Growth Stocks
Some of the risks of investing in growth stocks include the potential for price volatility and a lack of dividends.
Price fluctuations: Growth stocks are known to exhibit higher volatility than other names. Rapid price swings can be beneficial to investors, but they can also mean quick sell-offs during market downturns, thereby increasing the risk to investors.
No dividends: Because most growth companies are focused on reinvesting profits back into the business to continue to grow, it’s unlikely that growth stocks will pay out a dividend to shareholders. Investors in growth stocks miss out on an opportunity for passive income that is only found in stocks that pay dividends.
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As of the date this article was written, the author does not own any of the above stocks.