Even the best businesses go through difficult times. But the best ones are able to make it through to the other side and provide outstanding rewards for shareholders.

Diploma

The Diploma (LSE:DPLM) share price is a great example of what happens when a company’s growth slows. It’s fallen almost 11% since the start of the year.

The business is still growing – its latest trading update reported 7% sales growth, boosted by another 7% from acquisitions. But the firm indicated this is set to drop in 2025. As a result, the stock’s gone from trading at a price-to-earnings (P/E) ratio of 31 (based on the company’s adjusted figures) to 26. And that’s caused the stock to fall. 

If the slower growth rate proves to be temporary, Diploma shares could turn out to be a terrific investment. I think it’s a stock growth investors should absolutely have on their radars.

Amazon

Shares in Amazon (NASDAQ:AMZN) have fallen 21% since the start of the year. A big reason for this is tariffs, which could reduce activity in the firm’s online marketplace.

That’s why the stock’s down and this is a real risk. But it trades at a (P/E) ratio of 32, which is well above the S&P 500 average, but unusually low for the company.

Recently, Amazon’s sales growth has been led by its cloud business and advertising division. As a result, margins have widened as revenues increased, giving earnings a double boost.

I think there’s a lot more to come from both parts of the business. So I think the unusually low P/E multiple is an opportunity for investors to take a look at an extremely high-quality stock.

Five Below

US retailer Five Below (NASDAQ:FIVE) might be the best opportunity of them all. It’s a discount retailer that’s seen its share price fall 58% in the last year. 

The big risk for the business is inflation. Around 45% of its sales come from households with incomes below $50,000 and these are the budgets that are hit hardest by higher costs. 

That’s not good, but I think the stock’s fallen too far. In terms of growth, Five Below plans to double its store count from where it was at the end of 2024 over the long term. 

This expansion by itself could significantly boost profits. And in my view, with the stock trading at a P/E ratio of 14, it’s definitely one for growth investors to taking notice of.

The best?

I think Diploma, Amazon, and Five Below are all quality businesses with outstanding prospects. Saying they’re the best is very subjective though, as is saying which one is best. That choice will come down to the individual investor.

For me, the one that appeals to me the most is Amazon. Unusually, there aren’t many US stocks in my portfolio, mostly for valuation reasons. 

Others might reasonably have a different view – and I wouldn’t necessarily argue. But I’m convinced that growth investors should be looking for opportunities as share prices fall.

The post Are these the best growth stocks to consider buying? appeared first on The Motley Fool UK.

I think this has been the case recently. There are a few shares that I see having become much more attractive since the start of the year – and I think investors should add them to their watchlists.

Judges Scientific

Judges Scientific (LSE:JDG) is a great example of the kind of stock I have in mind. It’s down 20% since the start of the year and it’s reached a level where I’ve actually started buying it for my portfolio.

The scientific equipment conglomerate has a market cap of £475m and generates around £16m in free cash. That’s around a 3.1% return, but I’m not interested in this one for the instant returns. 

The company looks attractive because it has a lot of scope for future growth. Primarily, I expect this to be driven by acquiring other businesses – which is something it has done very successfully in the past.

This can be risky – the danger of overpaying for an acquisition is real. But the lower the share price goes, the more I think investors have a margin of safety against this possibility.

Tristel

Another growth stock I think looks attractive at the moment is Tristel (LSE:TSTL). This is also stock I’ve been buying recently and it’s one investors should consider it too.

The stock is down almost 25% since the start of the year, but it could be on the verge of something important. The medical disinfectant company is in the process of expanding into the US market. 

This won’t necessarily be straightforward. Tristel’s products command a premium price and this means there’s a risk that hospitals might be reluctant to move away from existing solutions. 

The firm, however, has had some success with its wipes for ultrasound and it’s expecting approval for its ophthalmology solution this year. Over time, I think this could generate some significant growth.

Five Below

The S&P 500 might be in correction territory, but the US stock catching my eye at the moment is Five Below (NASDAQ:FIVE). It’s a discount retailer that I think has some exciting prospects. 

The company is hoping to reach 3,500 outlets, which is roughly double its current number. If it can do this, I expect a big boost to profits, but there are some potential challenges ahead. 

One of these is inflation. This is particularly relevant in the US at the moment and could mean consumer spending taking a hit, causing Five Below’s growth to come in slower than expected.

I think, however, that this is reflected in the share price. The stock trades at a price-to-earnings (P/E) ratio of 14, which isn’t what someone might expect to see from a company with big growth opportunities.

Off the beaten track

The stocks I’ve mentioned here aren’t ones that typically get a lot of attention. But I’m a firm believer in the idea that the best opportunities are often found in places where other investors aren’t looking. 

Until recently, Judges Scientific, Tristel, and Five Below had all been fairly expensive. With share prices falling, however, I think investors should add them to their watchlists.

The post 3 growth stocks for investors to add to their watchlists appeared first on The Motley Fool UK.

This might indicate there’s a lot of value on offer elsewhere. But when it comes to US stocks, the opportunities that stand out to me the most are outside the S&P 500. 

The Magnificent Seven

Analysts at Goldman Sachs are forecasting 10% gains for the S&P 500 – roughly in line with the historical average. And they are again anticipating strong growth from the companies known as the ‘Magnificent Seven’.

Importantly though, this isn’t the only area that’s expected to do well. Businesses that are exposed to the US economy are set to benefit from lower taxes from the new government.

Goldman’s forecast is that the Magnificent Seven will outperform again in 2025. But while the index as a whole is for a more modest gain, growth should come from a broader range of sectors.

The idea that smaller companies are set to do well is encouraging for the stocks I’m looking to buy. But I’m not just thinking about the next 12 months – I’m looking for long-term opportunities.

Five Below

Top of my list is Five Below (NASDAQ:FIVE) – the discount retailer that sells things for $5… or less. In terms of growth, the company’s looking to roughly double its store count by the end of 2030.

If it achieves this, I expect margins to expand as the business benefits from economies of scale. But even if it doesn’t, double the outlets should make for double the profits.

A price-to-earnings (P/E) multiple of 23 looks expensive, but it’s actually towards the lower end of its historic range. And the same is true on a price-to-book (P/B) basis (which I think is a better metric to use here).

Five Below price-to-book ratio 2015-24

Created at TradingView

The company depends heavily on households with low incomes and this source of revenue can be fragile. So while I’m looking to buy the stock at these prices, the risks shouldn’t be underestimated.

Polaris

Polaris (NYSE:PII) makes recreational vehicles, including snowmobiles, motorbikes, and boats. It’s one of the oldest brands in the industry and its name is a key asset that allows it to earn strong returns on equity.

Polaris return on equity 2015-24

Created at TradingView

Aside from cyclicality, the big challenge for Polaris is that it’s easy for customers to switch to another manufacturer’s product. And that’s a long-term challenge.

As I see it though, the current share price is worth the associated risks. Earnings are highly cyclical, but the current share price seems to reflect a pessimistic outlook, which I think is temporary.

Polaris price-to-book ratio 2015-24

Created at TradingView

Right now, the stock trades at a price-to-book (P/B) multiple of 2.5. That’s unusually low and I think this is an opportunity to add shares in a quality company to my portfolio at a very decent price.

US stocks

I don’t consciously look for opportunities outside the S&P 500. But sometimes companies like Five Below and Polaris present opportunities I find attractive.

In both cases, I’m hoping for something very positive over the long term. That’s why I’m looking to buy both in the New Year.

The post Forget the S&P 500 — here are the top 2 US stocks on my buy list right now appeared first on The Motley Fool UK.

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Amazon

What it does: Amazon is a technology company that operates in the e-commerce, cloud computing, and digital advertising markets. 

By Edward Sheldon, CFA. Amazon (NASDAQ: AMZN) stock has performed really well in 2024. However, as we approach 2025 I remain very bullish on it. 

I’m really excited by the level of innovation at Amazon right now. Recently, it launched ‘Haul’ – an online shopping service designed to compete with Temu. It has also been developing ‘Trainium 2’ AI chips. It’s hoping that these chips can rival those made by Nvidia. 

I’m also excited by the financials here. This year, the company’s earnings per share are projected to grow 77%. Next year, analysts expect growth of another 20%. 

One other reason I’m bullish is that the stock has massively underperformed other mega-cap tech stocks like Microsoft and Apple in recent years. With the valuation near historic lows currently, I reckon there’s potential for a catch up. 

Of course, Amazon operates in competitive industries. So, there’s no guarantee that its shares will do well in the years ahead. 

I think they have a huge amount of potential though. Currently, Amazon is my largest individual stock holding. 

Edward Sheldon owns shares in Amazon, Nvidia, Microsoft, and Apple.

Five Below

What it does: Five Below is a US discount store that sells a whole range of items (mostly) for $5 or less.

By Stephen Wright. Shares in Five Below (NASDAQ:FIVE) have been falling again. The stock might be above its August lows, but it’s still at a level where I think it’s an interesting opportunity.

Discount retail can be a minefield. Targeting households with relatively low incomes – especially with discretionary items – makes a business especially vulnerable to economic downturns.

Nonetheless, I find Five Below’s position difficult to ignore. For one thing, the firm has plenty of scope for growth – it’s looking to expand its store count by 12% per year over the next five years.

Importantly, the payback period for a new outlet is less than a year. That means the company should be able to keep growing without putting its balance sheet under stress.

The latest decline in the stock brings the price-to-earnings (P/E) ratio down to around 16. And at that level, it’s top of my list of US stocks to consider buying in November.

Stephen Wright owns shares in Five Below.

Novo Nordisk 

What it does: Novo Nordisk is a pharmaceutical giant specialising in diabetes care, obesity treatment, and other serious chronic diseases.

By Ben McPoland. Novo Nordisk (NYSE: NVO) stock has been volatile since Donald Trump nominated Robert F. Kennedy Jr. to be head of the US health department. Kennedy is critical of weight-loss medications, making investors nervous about the growth implications for Wegovy, the company’s blockbuster anti-obesity treatment.

So that’s a risk, while clinical trial setbacks for its next-generation weight-loss treatments are always possible.

Still, I think the stock’s 30% drop (as I write) since June makes it worthy of consideration. It’s now trading at its lowest forward price-to-earnings multiple all year (26).

The company is firing on all cylinders. Revenue jumped 24% to approximately $29bn in the first nine months of 2024, boosted by surging Wegovy sales. 

The weight-loss medication has just been approved in China, where there are thought to be over 100m people living with obesity. Wegovy is now available in at least 16 countries (surely more will follow). 

Meanwhile, the company’s operating profit margin remains above 40%. So this is an extremely high-quality business. 

Looking ahead, some analysts forecast a $150bn weight-loss market by the early 2030s. Novo Nordisk appears perfectly positioned to continue leading this rapidly growing market.

Ben McPoland does not have a position in any stocks mentioned.

PayPal Holdings

What it does: PayPal is a digital payment processing platform enabling 426 million users to execute transactions online.

By Zaven Boyrazian. PayPal (NASDAQ:PYPL) is one of the biggest digital payment processors in the world, controlling an estimated 46% of market share within the global payment service sector, according to WallStreetZen. However, the company’s valuation became quite rich, leading into the 2022 stock market correction. And consequently, the digital payments giant watched its market cap collapse.

Yet over the last couple of months, PayPal has been quietly bouncing back climbing by almost 50% in the past year. While top-line growth is still subdued, expansion in profit margins paired with increased user activity is driving profits and cash flows even higher. Yet its price-to-earnings ratio is still sitting around 20 versus its historical average of 45.

Obviously, there’s a growing competitive threat from alternative digital payment companies like Stripe and Revolut. However, the currently cheap valuation makes this a risk worth taking, in my opinion. That’s why I’ve already added more shares to my portfolio this month.

Zaven Boyrazian owns shares in PayPal.

Twilio

What it does: Twilio offers software to integrate communication services into apps, like connecting drivers and riders.

By Dr James Fox. Twilio (NYSE:TWLO) stock is finally expected to deliver on its earnings potential. The company surged during the pandemic as investors chased the next big winner in communications tech, but until recently, it had failed to deliver. 

The company’s previous underperformance can be traced to a bloated cost structure, wreckless acquisitions, and broader inefficiencies. However, with recent cutbacks, Twilio is starting to look like a well-oiled machine. 

Earnings are expected to grow by 30% annually over the next three to five years reflecting a strong operating environment and better cost management. The communications company now trades at 26.3 times forward earnings and has a price-to-earnings-to-growth ratio of 0.88. 

Now, because investors have high expectations (as shown by its high P/E ratio), there’s a risk that the company might not be able to meet these expectations, which could negatively impact its stock price. 

However, the company has outperformed analysts’ expectations time after time in 2024, and I’m confident this will continue. 

James Fox owns shares in Twilio

The post Best US stocks to consider buying in December appeared first on The Motley Fool UK.

A couple of companies have been having a difficult time recently and I’m looking for them to turn the corner. If I’m right, December could be my last chance to buy them at decent prices.

Rentokil Initial

Rentokil Initial (LSE:RTO) shares have been choppy over the last year or so. But I’ve been seeing the declines as a long-term buying opportunity. 

In 2022, the company acquired rival Terminix to boost its presence in the US. Given that this accounts for over half of the global pest control market, this seems like a smart move. 

The trouble is, things haven’t worked yet. The expected synergies have taken time to appear and the only thing that has really grown is Rentokil’s debt, which is an ongoing risk. 

I think it’s just a matter of time though. And while the firm’s October update was uninspiring overall, the CEO suggested the integration is progressing and results should appear soon.

Since then, the Rentokil share price has climbed almost 20% and a positive update in early 2025 could cause the stock to jump again. If that happens, it might be too late for me.

With the balance sheet carrying a lot of debt, the risk of further delays is significant. But right now, I think the bigger danger for me is missing the long-term opportunity to buy the stock

Five Below

Another opportunity where I think a window might be closing is Five Below (NASDAQ:FIVE). The company has some strong growth prospects, but the stock has fallen badly in 2024.

The big issue has been inflation. As a discount retailer, the firm generates a lot of its revenues from households with annual incomes below $50,000, which are worst-affected by rising prices.

This continues to be the big risk with the business. And the October data indicated that the rate of price increases started to move higher again.

I rate Five Below’s growth prospects though. Its ambition to increase its store count by around 12% a year until 2030 should help it justify its current valuation, even in a tough environment. 

Crucially, I think the company can do this without stressing its balance sheet. With new stores breaking even within a year, I expect the firm to be able to grow using cash instead of debt. 

The stock’s up 33% from when I started buying it in August though. So while I think there’s still a good opportunity here, I’m looking to take advantage before it goes any higher.

Unusual opportunities

Shares in Rentokil and Five Below aren’t on my watchlist for December – they’re on my buy list. I like both companies, but I think the time to buy the stocks might be running out. 

I’m not sure which I think is the better stock to buy at the moment. But fortunately for me, there’s no rule saying I can only choose one of them!

The post 2 top growth stocks I’m buying in December… before it’s too late appeared first on The Motley Fool UK.

Barclays

What it does: Barclays moves, lends, invests and protects money for customers and clients in over 40 countries.

By James Beard. Barclays (LSE:BARC) isn’t the best performing UK bank at the moment but I think it’s the one with the biggest potential. That’s why I bought some of its shares last month.

With a price-to-book ratio of 0.45, and a 12-month trailing price-to-earnings ratio of 7.1, the stock appears to offer good value. By 2026, analysts are expecting earnings per share to grow by nearly 60%, compared to their anticipated 2024 level. That’s because the bank’s seeking to improve its poor return on capital which lags behind that of its FTSE 100 peers.

However, there are risks. There’s no guarantee that the turnaround plan will work and banking stocks can be volatile. Bad debts could also be a problem if the global economic recovery stalls.

But I have confidence in the bank’s chief executive who plans to reduce costs by £2bn – and return at least £10bn to shareholders – over the next three years.

James Beard owns shares in Barclays.

First Solar

What it does: First Solar is one of America’s leading solar energy companies, known for thin-film solar panels.

By Oliver Rodzianko. I bought First Solar (NASDAQ:FSLR) recently after its valuation improved.

Management is expanding its manufacturing capacity through two new facilities set to be operational by late 2025. This is crucial to meeting the continued high demand for solar power. It also positions it as a key competitor against Chinese solar companies.

Analysts expect the company to achieve year-on-year revenue growth of 35.5% in 2024 and 26% in 2025. If its valuation also expands, then the returns over the next two years could be very large indeed.

However, China controls over 80% of the global solar supply chain. These businesses could put pricing pressure on First Solar, inhibiting its share price growth.

That being said, I’m bullish on Western green energy. First Solar is one of the strongest US solar investments I know.

Oliver Rodzianko owns shares in First Solar.

Five Below

What it does: Five Below runs a chain of retail outlets selling on-trend items to teenagers priced (mostly) at $5 or less.

By Stephen Wright. Shares in US retailer Five Below (NASDAQ:FIVE) have fallen 57% over the last 12 months. And they’ve reached a point where I think they look like terrific value. 

The company is heavily exposed to households with an income below $50,000 per year. That makes the risk of an economic downturn significant for the business. 

Despite this, Five Below has some impressive growth prospects. It’s looking to expand its store count at a rate of 12% per year for the next few years. 

Normally, this would involve taking on debt. But with new outlets breaking even by the end of the year, the company shouldn’t need to expose its balance sheet to danger in order to achieve its goals.

With the stock falling to a price-to-earnings (P/E) ratio of 15, I saw my chance and went for it. It’s started to rally already, though, so I’m on the lookout for another opportunity.

Stephen Wright owns shares in Five Below.

Taylor Wimpey

What it does: One of the UK’s largest home construction companies, building everything from apartments to six-bedroom homes. 

By Mark David Hartley. With the new Labour government coming into power, I’ve noticed renewed enthusiasm about building low-cost housing. Affordable housing accounted for 21% of builds performed by Taylor Wimpey (LSE: TW.) in 2022, so it’s in good stead to benefit from this surge. 

Falling interest rates could also help but for now, the UK’s economic outlook remains unclear. Housing is particularly sensitive to this, so that presents a risk to the stock. Delays and unexpected costs are another concern, as the Middle Eastern conflict threatens material deliveries via the Suez Canal.

With earnings forecast to grow, the stock’s price-to-earnings (P/E) ratio could drop from 24 to 18 in the next 12 months. But that’s still above the industry average, so growth may be slow this year. Fortunately,  it has an attractive 5.8% yield, so it makes a great addition to my dividend portfolio either way.

Mark David Hartley owns shares in Taylor Wimpey.

Xtrackers MSCI World Value UCITS ETF

What it does: Xtrackers MSCI World Value UCITS ETF invests in hundreds of global shares using a value strategy.

By Royston Wild. Buying value shares can have significant benefits for investors. I’ve chose to increase my own exposure to this category by recently opening a position in the Xtrackers MSCI World Value UCITS ETF (LSE:XDEV).

Value stocks can deliver market-beating capital appreciation over time as investors wake up to their cheapness. These shares can also be more stable during economic downturns as their low valuations already reflect potential profit risks.

This particular ETF tracks the performance of the MSCI World Enhanced Value Index, which comprises 400 large- and mid-cap companies across 23 developed markets. Major holdings include US tech stocks Cisco Systems, Qualcomm and IBM.

With a price-to-earnings (P/E) ratio of 9.6 times and 5.19% dividend yield, the fund offers excellent all-round value for money.

On the downside, this Xtrackers product may underperform during a sustained bull market. During these periods, investors tend to favour growth shares over value stocks. But over the long term I’m confident it will prove a valuable addition.

Royston Wild owns Xtrackers MSCI World Value UCITS ETF.

The post 5 shares that Fools have been buying! appeared first on The Motley Fool UK.

In general, quality growth stocks often come with prices to match. That’s not unreasonable and – as Warren Buffett says – buying a wonderful company at a fair price is better than the other way around. 

The best opportunities though, are shares in growing businesses that trade at bargain prices. And for investors who are willing to look beyond the major names, I think there are a couple that stand out.

Porvair

Shares in Porvair (LSE:PRV) have really struggled in August, but the company’s long-term competitive advantages still seem to be intact. To my mind, that makes a really exciting proposition.

The company makes filtration equipment for a variety of end markets, including aerospace, laboratories, and petrochemicals. And the barriers to entry for competitors are huge. 

Porvair focuses on products that are either mandated or regularly replaced. This generates repeat business and makes it almost impossible for customers to switch to alternative suppliers.

The risk with this type of business is that these end markets can be highly cyclical. This manifested itself during the pandemic in the case of aerospace and more recently with weak demand for lab equipment.

There’s not much Porvair can do about this. But its shareholders can try to limit the investment risk by buying the stock at a good price. 

With the shares trading at a forward price-to-earnings (P/E) multiple below 16, I think the time is now. That’s why the stock is on my list to buy in September. 

Five Below

It’s been a strange few days for Five Below (NASDAQ:FIVE). The stock jumped after its own earnings report, but fell back after fellow discount retailer Dollar General warned about consumer weakness. 

After all that, the stock is back in territory where I’ve been buying it recently – at a P/E ratio of around 15. So I’m looking to add to my investment this month. 

Five Below has been struggling with weak like-for-like sales as US consumers – particularly those with the lowest household incomes – cut back on their spending. The risk is that this might continue.

In the short term, however, the company has a way of limiting the damage. It’s attempting to increase its store count by about 12% per year for the next few years. 

With the average store breaking even within a year, the firm has been able to fund its growth without taking debt onto its balance sheet. That puts it in a strong position to weather a cyclical downturn.

Over the long term, I think the company’s low prices will prove durable. And rapid store expansion means I’m expecting strong growth for what is currently a pretty reasonable price. 

Market timing?

I’m not a believer in trying to time the market. But I do think it’s wise to pay attention to which stocks are unusually cheap. 

Sometimes, these can be extremely high-quality businesses that are going through short-term difficulties. And when that happens, there can be great opportunities for investors.

That’s what I think has been happening with Porvair and Five Below recently. They operate in different industries and different countries, but the same core of growth at reasonable prices is still there.

The post 2 under-the-radar growth stocks at bargain prices appeared first on The Motley Fool UK.

Despite growing sales at 19% and profits at 15% since 2018, the stock trades at a price-to-earnings (P/E) ratio of 12.5. Even with the prospect of a recession in the US, I think this is far too cheap.

Discount retail

Five Below is a discount retailer that mostly sells things below $5 – a bit like a more expensive Poundland. The main growth avenue for the business going forward involves opening more stores.

At the start of 2024, the company operated 1,544 outlets. It’s looking to expand this by 12% per year to reach 3,500 by the end of 2030.

Opening that many new stores takes a lot of cash. For most retailers, the only way to do this would be to take on debt, putting the balance sheet at risk.

This is where Five Below really stands out though. The average payback period for a new outlet is very short – less than a year, on average.

That means the business is able to finance its growth using its own profits. This removes the need to take on debt and reduces the risk of the company’s growth plans.

At the start of the year, those ambitions came with a high price tag. But after a 69% decline, I don’t think that’s the case any longer.

Why is the stock down?

There are a few reasons Five Below’s share price has been falling. One is a possible recession, which is an issue for a company that gets 45% of its sales from households with an income below $50,000.

Another is theft – with a number of cities no longer prosecuting retail theft, the likes of Five Below are having to spend more on security. The result is higher costs and lower profits. 

Both of these are genuine issues for the company that would stop me buying the stock if it was still trading at $215 per share – as it was in January. But at $66 per share, it’s a different story.

With a debt-free balance sheet, Five Below is in a good position to withstand a recession. And after that, I expect growth to pick up again.

It might be difficult for the company to keep growing its revenues at 18% per year in an economic downturn. But over the long term, things look much more positive.

Ultimately, Five Below is aiming to double its sales and profits from last year. And I would expect the stock to do at least the underlying business, even if it takes a decade.

From overvalued to oversold

At the start of the year, I wouldn’t have thought of Five Below as a stock worth considering. But as investors worry about a potential economic downturn in the US, that’s very much changed. 

In my view, recessionary fears have caused the market to go from overvaluing the stock to underestimating its growth prospects. As a result, I’m looking to buy it for my portfolio.

The post 1 oversold growth stock I’m buying as investors worry about a US recession appeared first on The Motley Fool UK.