Stocks to buy

The stock market is on fire, with growth stocks hitting new highs almost every day. Sectors such as artificial intelligence and semiconductors are enjoying tremendous momentum right now. For traders that want to ride the wave, there are plenty of opportunities.

For more valuation-focused investors, however, the growth stock space looks challenging with so many firms having already skyrocketed over the past year. But there is good news. There are still some quality growth stocks available at favorable prices. Here are three of the top undervalued growth stocks to buy now.

Daqo New Energy (DQ)

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Daqo New Energy (NYSE:DQ) is a Chinese company which makes polysilicon products which go into wafers, cells, and modules for solar power units.

DQ stock has gone on a wild ride over the past four years. Shares were around $10 near the start of the pandemic, and ultimately topped $100 during the solar boom of 2021. Shares crashed to as low as $17 before rallying to $28 in recent days.

Why is DQ stock back on the upswing? Two factors. First, it has a tremendous balance sheet, it has net cash of more than $40/share and a book value of $63.13 per share. This implies that Daqo New Energy’s cash and manufacturing assets alone are worth far more than the company’s current trading value.

For another thing, the operating business has improving prospects. While the firm’s revenues crashed in 2023, analysts see top-line growth returning in 2024. Meanwhile, shares are going for just six times forward earnings. That’s an incredible bargain given the tremendous amount of cash and other balance sheet assets that further support the firm’s share price.

Endava (DAVA)

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Endava (NYSE:DAVA) a leading offshoring IT consultant. The idea is that Endava hires skilled IT workers in emerging market countries such as Poland, Colombia, and Vietnam. In turn, it uses this workforce to complete IT projects and contracts for Fortune 500 companies and earn large profit margins in the process.

Endava has tripled revenues in recent years and grown profitability tremendously. The company enjoyed a boost to its growth rate due to pandemic-related disruptions which led firms to increase their IT capabilities to handle remote work, faster e-commerce adoption, and rising demand for digital services.

As that growth tailwind abated, however, DAVA stock has plummeted. Shares are now down roughly 75% from their 2021 highs even as the firm continues to grow. The company just announced another big acquisition which should power Endava to record results in its fiscal year 2025.

DAVA stock recently tumbled following its most recent earnings report. Despite a near-term slowdown, however, the company reiterated its commitment to 20% compounded organic revenue growth in the years to come. That makes shares a tremendous bargain here with the stock trading at just two times sales today.

Corporacion America Airports (CAAP)

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Corporacion America Airports (NYSE:CAAP) is one of the world’s largest private operators. It runs 53 airports in six countries and its properties, in aggregate, served 81.1 million passengers in 2023.

Airports are a highly favorable asset class for several reasons. One, they tend to be natural monopolies. Two, they have low operating costs; once an airport is built, it can produce growing cash flow for decades. And airports don’t take the sorts of operational risks that airlines do; airports aren’t exposed to pilot strikes, jet fuel shortages, airplane mechanical defects, or other such matters which tend to trip up airlines.

And why Corporacion America Airports specifically? The firm gets around half of its revenues and profits from Argentina. While Argentina has historically struggled, investors are increasingly optimistic that the new president, Javier Milei, will reform Argentina’s economy and put that country back on the path to prosperity.

In any case, Corporacion America Airports greatly improved its cost structure during the pandemic and is now far more profitable than it was in 2019. The company is set to grow top-line revenues about 10% this year as traffic soars past pre-pandemic levels; meanwhile shares go for just 12 times projected 2024 earnings.

On the date of publication, Ian Bezek held a long position in DAVA and CAAP stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.

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