Stocks to buy

The 3 Best Growth Stocks to Buy Now: September 2023

Growth stocks tend to be riskier than blue-chip stocks, but investors can reap some of the highest returns with these assets. While growth stocks often get hit hard by market corrections, these are the types of stocks that can double or triple within a few years.

Cathie Woods’ growth-centric funds demonstrate how quickly growth stocks can soar and how quickly they can crash. Her funds were among the top performers during the pandemic, but those funds came crashing down in 2022. Those same funds have experienced a resurgence this year due to growth stocks becoming favorable again.

You don’t have to invest in high-revenue, high-losses companies to get the growth investor experience. There are plenty of growth stocks with good fundamentals and promising prospects. These are three of the best growth stocks to consider buying.

Arista Networks (ANET)

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Arista Networks (NYSE:ANET) is a cloud networking company that has more than 8,000 customers and a 19% market share in data centers. Shares trade at a reasonable 36 P/E ratio and have gained over 60% year-to-date. The cloud networking company has rewarded long-term investors with a 192% gain throughout the past five years.

Arista Networks got its start by working with financial companies that wanted to enable high-frequency trading for their customers. This start helped the company expand into data centers and early-stage companies. The firm has worked with many large customers, such as Microsoft (NASDAQ:MSFT), VMware (NYSE:VMW) and Dell (NYSE:DELL).

The company has dozens of products, including Cloud Vision and AI Spine. Cloud Vision helps with workflow automation, while AI Spine enables top-tier AI interconnection which is essential for real-time gaming, virtual reality and metaverse applications.

Arista Networks also has a cybersecurity component through its Zero Trust Networking service and recently introduced Cognitive Unified Edge, a product for small businesses.

Arista Networks reported 38.7% year-over-year revenue growth in the second quarter. GAAP net income jumped from $299.1 million in Q2 2022 to $491.9 million in the most recent second quarter. That marks a 64.5% year-over-year gain which makes the stock’s P/E ratio look more justified.

Nvidia (NVDA)

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Nvidia (NASDAQ:NVDA) has been at the forefront of the artificial intelligence boom. Shares have more than tripled year-to-date and are up by over 600% throughout the past five years.

I have expressed skepticism about Nvidia’s valuation in the past, but the most recent earnings report has made the valuation easier to justify. The stock’s P/E ratio is roughly 120 which is still high, but a few weeks ago, the stock had a 250 P/E ratio.

Nvidia doubled its Q2 revenue year-over-year and experienced 843% year-over-year net income growth. That latter metric explains why the stock can become more affordable in the future. Shares only trade at a 47 forward P/E ratio which is justifiable given the company’s incredible growth rate.

No investor should expect Nvidia to hold onto these growth rates forever. The company reported $13.5 billion in revenue and $6.2 billion in net income. It’s impossible for net income to grow another 843% year-over-year because net income would have to surpass revenue.

Eventually, the growth will slow down because it is unsustainable. Investors should consider how long Nvidia can hold onto these growth rates. If Nvidia continues on this trajectory for another year before retaining moderate growth rates (i.e., respectable double-digit revenue growth), the valuation can be a bargain for investors who buy at the current price.

Celsius Holdings (CELH)

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Most growth stocks are tech companies that tap into innovative concepts. However, some companies buck the trend and give shareholders enticing opportunities. Celsius Holdings (NASDAQ:CELH) investors know first-hand that the best growth stocks aren’t always in the tech sector.

The stock has almost doubled year-to-date but is up by an astounding 4,295% throughout the past five years. The energy drink producer reported a 112% year-over-year revenue jump in the second quarter. The company also reported $41 million in net income attributable to common shareholders which represents a 345% year-over-year gain.

Celsius Holdings doesn’t have the most attractive valuation, but growth rates and new partnerships make the stock look compelling over the long run. A recent partnership with Pepsi (NYSE:PEP) can give Celsius Holdings more exposure to international markets.

Celsius Holdings has a $15 billion market cap. As the company continues to grow its market share on the back of stupendous revenue and earnings growth, that market cap can become much larger.

On this date of publication, Marc Guberti held long positions in ANET, NVDA, and CELH. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.