In this article, we will take a look at the 11 oversold growth stocks to buy right now. To skip our analysis of the recent trends and market activity, you can go directly to see the 5 Oversold Growth Stocks to Buy Right Now.
Growth is a highly sought after phenomenon whether it pertains to the emotional or physical lives at a personal level or the big picture macroeconomic arena. There is an intrinsic desire that pushes human beings to continue to grow. The same applies for the world of investments. Investors seek different opportunities to grow their capital. Stocks, compared to other common investment options, offer higher probabilities of growth and wealth creation. If we dig deeper, among stocks, there are stocks of companies that have the potential to grow far more than other stocks.
To capture growth opportunities in the stock markets, investors can deploy different strategies in terms of management styles. For the passive investor, investing in themed ETFs (Exchange Traded Funds) can be a suitable strategy. For this purpose, you can go through our list of 13 Best Growth ETFs To Buy Now which discusses the best growth ETFs based on their 5-year share price performance as of March 27. iShares Russell Top 200 Growth ETF (NYSE:IWY), leads this list with 5-year share performance of 137.32%. The ETF is up 35.7% in the past 12 months and 9.02% year-to-date.
In this article, we refer to stock investment opportunities that have been oversold by the broader market due to different reasons (mostly short-term) yet have the potential to grow and generate promising returns in the future. Our list of 11 oversold growth stocks to buy right now includes quality stocks with market capitalizations ranging from a low of nearly $2.5 billion to as high as nearly $100 billion. Our list includes companies from several sectors although Healthcare holds the largest share.
Our list of 11 oversold growth stocks to buy right now includes companies that have suffered from individual negative catalysts, in addition to companies that are reeling from the general macroeconomic factors. For instance, Zoetis Inc. (NYSE:ZTS), a leading animal health company, saw its shares tumble nearly 8% in a single day as a news report cited safety concerns related to the company’s arthritis drugs for animals.
If we look at the broader macroeconomic conditions, there has been some turbulence in the stock markets as investors price in the possibility of interest rates remaining higher for longer. To recap, the Federal Reserve rapidly increased the interest rates beginning from near zero before March 2022 to the current 5.25%-5.50% range, the highest benchmark rate in the country in 22 years, in an effort to curb inflation. The Fed, at its May meeting to be held next week, is expected to maintain the interest rate at current levels with rate cuts dependent upon cool off in inflation. For March 2024, headline annual CPI inflation stood at 3.5%, and excluding food and energy, at 3.8%.
Investment advisory firm Ithaka Group made the following comments about the outlook for interest rates in its “Ithaka US Growth Strategy” Q1 2024 investor letter:
“Following the now infamous December policy meeting when the Fed raised the white flag on rate increases, asset markets (especially equity markets) nonetheless rallied through the first quarter. With three consecutive months of accelerating inflation, some Fed governors have started lightly pushing back on their original narrative of three rate cuts in 2024. With the central bank’s most hawkish member, Michelle Bowman, saying she would favor a rate hike if inflation progress stalls, and Minneapolis Fed President Neel Kashkari floating the possibility of not cutting rates at all in 2024. As has been the case for the past two years, the forward looking rate picture continues to shift with consensus expectations seemingly always playing catchup. While we are not economists, given the strength of the labor market and the accelerating nature of the inflation picture, it seems reasonable to expect a world where rates stay elevated longer than consensus currently expects.”
A businessman holding up a chart displaying business growth for a middle market company.
Methodology
To create our list of 11 oversold growth stocks to buy right now, we compiled a list of stocks with trailing P/E of more than 25.0 with the lowest 14-day Relative Strength Index (RSI) as of April 15. We only retained companies with market capitalization of more than $2.0 billion, EPS Next 5 Years estimates of 5% or more, and average analyst recommendations of ‘Buy’ or better.
The Relative Strength Index is a technical indicator that tracks momentum changes in stock prices. It was developed by J. Welles Wilder, and it is calculated by determining the mean of gains and losses of a stock in the last 14 days. An RSI above 70 implies that a stock is overbought and below 30 implies that it is oversold. These levels can be adjusted if needed. The stocks in this article are listed in descending order of their RSI.
Data from around 900 elite hedge funds tracked by Insider Monkey in the fourth quarter of 2023 was used to identify the number of hedge funds that hold stakes in each firm. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
11. Ciena Corporation (NASDAQ:CIEN)
14-day RSI as of April 5: 25.99
Latest Trailing P/E Ratio: 28.81
Number of Hedge Fund Holders: 39
Based in Hanover, Maryland, Ciena Corporation (NASDAQ:CIEN) is a leading global technology company offering optical and routing systems, services, and automation software. Its solutions are used by communications service providers, cable and multiservice operators, Web-scale providers, submarine network operators, governments, and enterprises across multiple industry verticals.
On March 7, Ciena Corporation (NASDAQ:CIEN) released its financial results for the quarter ended January 27, 2024. It generated a revenue of $1.04 billion and a net income of $50 million. Its normalized EPS of $0.66 surpassed consensus estimates by $0.18.
Following the earnings release, JP Morgan analyst Samik Chatterjee raised the price target on Ciena Corporation (NASDAQ:CIEN) shares to $67 from $56 and maintained an ‘Overweight’ rating for the shares.
Diamond Hill Capital, an investment management company, made the following comments about Ciena Corporation (NASDAQ:CIEN) in its “Mid Cap Strategy” Q4 2023 investor letter:
“Networking systems company Ciena’s customers are working through their inventories, creating some uncertainty around near-term demand. However, the company’s cloud customers have helped offset some of this uncertainty and, longer term, we believe Ciena has a meaningful opportunity to take share in the switching and routing and optical markets.”
10. Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN)
14-day RSI as of April 5: 25.98
Latest Trailing P/E Ratio: 25.86
Number of Hedge Fund Holders: 59
Based in Tarrytown, New York, Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) is a leading biotechnology company that focuses on developing therapies for eye diseases, allergic and inflammatory diseases, cancer, cardiovascular and metabolic diseases, pain, hematologic conditions, infectious diseases, and rare diseases.
On February 23, Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) announced that the FDA has accepted for Priority Review the application for Dupixent® (dupilumab) in a sixth potential indication as an add-on maintenance treatment in certain adult patients with uncontrolled chronic obstructive pulmonary disease (COPD). If approved, Dupixent would be the only biologic therapy for COPD. The Priority Review has been granted based on positive results from two Phase 3 trials.
As of Q4 2023, Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) shares were owned by 59 of the more than 900 hedge funds tracked by Insider Monkey, the highest on our list of 11 oversold growth stocks to buy right now. D E Shaw was its lead hedge fund shareholder with ownership of 0.36 million shares valued at $320 million.
9. IDEXX Laboratories, Inc. (NASDAQ:IDXX)
14-day RSI as of April 5: 25.58
Latest Trailing P/E Ratio: 48.82
Number of Hedge Fund Holders: 43
Westbrook, Maine-based IDEXX Laboratories, Inc. (NASDAQ:IDXX) is a global leader in veterinary diagnostics, software, and water microbiology testing with a history that dates back to 1983. It employs nearly 11,000 people and offers solutions and products to customers in more than 175 countries and territories.
On February 5, IDEXX Laboratories, Inc. (NASDAQ:IDXX) released its financial results for Q4 2023. Its revenues increased by 9% y-o-y to $902 million, while its net income increased by 13% y-o-y to $195 million. It generated a normalized EPS of $2.32, which exceeded consensus estimates by $0.20.
In its Q4 2023 “Alger Mid Cap Growth Fund” investor letter, Fred Alger Management, an investment management company, made the following comments about IDEXX Laboratories, Inc. (NASDAQ:IDXX):
“IDEXX Laboratories engages in the development, manufacture, and distribution of products and services for the companion animal veterinary, livestock and poultry, water testing, and dairy markets. The company’s Companion Animal Group provides in- clinic laboratory analyzers for companion animals. Analyzers measure blood cell counts as well as levels of certain enzymes in blood or urine for the purpose of monitoring health conditions. During the quarter, shares contributed to performance after the company reported strong fiscal third quarter results, where profit margins came in better-than-expected. Moreover, management guided better-than-expected Companion Animal Group revenue in 2024 compared to expectations despite light office visits. We believe the companion animal market has largely normalized after the Covid-19 spike and the company remains a compounding asset in a growth market, where we believe the launch of IDEXX’s point-of-care analyzer has the potential to be a positive catalyst for customer wins.”
8. Neogen Corporation (NASDAQ:NEOG)
14-day RSI as of April 5: 24.96
Latest Trailing P/E Ratio: 1668.06
Number of Hedge Fund Holders: 17
Lansing, Michigan-based Neogen Corporation (NASDAQ:NEOG) develops and markets products dedicated to food and animal safety. Its products include dehydrated culture media, diagnostic test kits, diagnostics, veterinary instruments, veterinary pharmaceuticals, nutritional supplements, disinfectants, and rodenticides.
On September 1, 2022, Neogen Corporation (NASDAQ:NEOG) announced the completion of its merger with the food safety business of 3M Company (NYSE:MMM). As part of the transaction, existing Neogen Corporation (NASDAQ:NEOG) shareholders retained 49.9% of the combined company with the remaining 50.1% owned by 3M shareholders. 3M also received consideration valued at $1.0 billion.
On April 15, Piper Sandler analyst David Westenberg lowered the price target for Neogen Corporation (NASDAQ:NEOG) shares to $17 from $19 and maintained a ‘Neutral’ rating for the shares. The target price represents a potential upside of 41.55% based on the latest share price.
As of Q4 2023, Neogen Corporation (NASDAQ:NEOG) shares were owned by 17 prominent hedge funds tracked by Insider Monkey. Robert Joseph Caruso’s Select Equity Group was the lead hedge fund shareholder with ownership of 8.4 million shares valued at $168 million.
7. Steris Plc (NYSE:STE)
14-day RSI as of April 5: 23.25
Latest Trailing P/E Ratio: 35.29
Number of Hedge Fund Holders: 31
Dublin, Ireland-based Steris Plc (NYSE:STE) is a leading global provider of products and services that support patient care with an emphasis on infection prevention. It operates in more than 100 countries worldwide.
On February 7, Steris Plc (NYSE:STE) released its financial results for the quarter ended December 31, 2023. Its revenue increased by 15% y-o-y to $1.4 billion while net income went up 14% y-o-y to $141 million. Earlier, the company paid a quarterly interim dividend of $0.52 which translates to a dividend yield of 1.01%, one of the highest on our list of 11 oversold growth stocks to buy right now.
On April 11, Steris Plc (NYSE:STE) announced that it had entered into a definitive agreement to divest its Dental segment to Peak Rock Capital for $788 million. The divestiture allows the company to focus on customers within core markets.
6. Nextracker Inc. (NASDAQ:NXT)
14-day RSI as of April 5: 22.66
Latest Trailing P/E Ratio: 26.79
Number of Hedge Fund Holders: 33
Fremont, California-based Nextracker Inc. (NASDAQ:NXT) is a leading provider of intelligent solar tracker and software solutions used in utility-scale and distributed generation solar projects around the world.
The IPO of Nextracker Inc. (NASDAQ:NXT) was completed on February 9, 2023, by its parent company, global electronics manufacturing services provider Flex Ltd. (NASDAQ:FLEX). This makes it one of the youngest stocks on our list of 11 oversold growth stocks to buy right now.
On January 31, Nextracker Inc. (NASDAQ:NXT) released its financial results for the quarter ended December 31, 2023. Its revenue went up by 38% y-o-y to $710 million, while it reported a net income of $41 million and a normalized EPS of $0.96. Both top and bottom-line figures surpassed consensus estimates, by $91.7 million and $0.47, respectively.
On April 10, BofA Securities analyst Dimple Gosa raised the price target for Nextracker Inc. (NASDAQ:NXT) shares to $60 from $53 and maintained a ‘Buy’ rating. The target price represented a potential upside of 33.84% based on the latest share price.
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Disclosure: None. 11 Oversold Growth Stocks to Buy Right Now is originally published on Insider Monkey.