Growth stocks represent companies that are scaling up existing operations or sometimes evolving into new fields. Thus, they have the potential to generate substantial returns. This makes growth stocks exciting investments, but investors must consider the underlying company’s financial health to see if it has a clear path to achieve its aims.
Here are two growth stocks that meet this criteria for under $200.
Growth Stock #1: Skechers U.S.A.
The first growth stock on my list is Skechers (SKX), a well-established name in the footwear industry, recognized for its wide-ranging product portfolio that spans casual and athletic footwear. Operating more than 5,332 stores worldwide, the company has performed well in recent years despite the volatile nature of the retail industry. In 2023, Skechers reported revenue of $8 billion, a significant increase from $2.4 billion in 2014. Last year, the stock rose 8.2%, underperforming the S&P 500 Index’s ($SPX) 24% gain.
Skechers designs, develops, and markets footwear for men, women, and children, offering casual shoes, performance footwear, sandals, boots, and athletic shoes. The brand has successfully expanded its product lineup and grown its international presence, fueling its revenue growth.
In the third quarter of 2024, Skechers reported a 15.9% increase in revenue to $2.3 billion, with diluted earnings per share rising 35.5% to $1.26. Wholesale sales grew 20.6%, while direct-to-consumer sales climbed 9.6% during the same period.
Skechers competes with industry giants like Nike (NKE), Adidas (ADDYY), Under Armour (UA), and Puma (PUMSY), which dominate the athletic footwear market. Skechers has successfully carved out its niche by appealing to customers seeking comfortable and stylish footwear at competitive prices.
One critical factor to note in Skechers’ financial position is its low debt levels. Unlike many of its competitors, Skechers has managed to grow its business without taking on excessive debt. With a debt-to-equity ratio of just 0.13x, the company maintains flexibility to navigate economic challenges and invest in growth opportunities. At the end of Q3, Skechers held $1.6 billion in cash, cash equivalents, and investments.
Management expects around 12% growth in revenue in 2024 and an earnings increase of 21%, in line with the consensus estimates.
Analysts that cover Skechers stock further expect revenue and earnings to increase by 10.2% and 15.8% in 2025, respectively. SKX stock is trading at 14.2x forward 2025 earnings, lower than its five-year historical average P/E of 22.7x.
Overall, Wall Street rates Skechers stock a “Strong Buy.” Out of the 12 analysts that cover SKX, nine rate it a “Strong Buy,” while one recommends a “Moderate Buy,” and two rate it a “Hold.”
Based on analysts’ average price target of $80.91, Wall Street sees potential upside of about 14% over the next 12 months. Its high targe of $93 implies a gain of 31% from current levels.
Growth Stock #2: Advanced Micro Devices
The second company on my list is semiconductor giant Advanced Micro Devices (AMD), also known as AMD. With the rapid advancement of artificial intelligence (AI), semiconductor companies have grown in popularity. AMD has evolved remarkably over the past decade, establishing itself as a key player in the semiconductor industry. Last year, AMD stock fell 12.8%, while the tech-heavy Nasdaq Composite Index ($IUXX) rose 30.7%.
However, Wall Street sees a upside of about 58.4% for AMD stock over the next 12 months, based on an average analyst price target of $184.58. Its high target sits at $250, indicating a potential increase of 113% from current levels.
Its advanced product portfolio includes the Ryzen series for CPUs and the Radeon line of GPUs. Radeon graphics cards are commonly used in data centers, gaming, and professional visualization. In the third quarter, AMD saw total revenue jump 18% to $6.8 billion, with adjusted earnings per share increasing by 31% to $0.92.
AMD’s Data Center segment’s revenue increased by 122% in the third quarter to $3.5 billion. The Client segment’s revenue increased by 29%, offsetting a 69% and 25% decrease in the Gaming and Embedded segments, respectively.
AMD is heavily investing in AI and machine learning capabilities. Its acquisitions of Silo AI, a private AI lab valued at $665 million, and ZT Systems, a hyperscale AI systems provider, are expected to bolster its Data Center segment. Management is optimistic about the progress made in this segment, noting growing deployments across a broader range of cloud, enterprise, and AI customers. This momentum could drive Data Center GPU revenue to surpass $5 billion for the full year 2024.
AMD ended the quarter with a strong balance sheet, holding $4.5 billion in cash, cash equivalents, and short-term investments, alongside a manageable debt of $1.7 billion. Additionally, its solid free cash flow balance of $496 million in the third quarter positions the company to continue investing in AI and strategic acquisitions while also paying down debt.
Although the Embedded segment faces challenges, AMD is working to expand it by introducing the cost-effective Alveo UL3422 Accelerator Card and Artix UltraScale+™ XA AU7P and EPYC Embedded 8004 Series processors. These new products could drive recovery in the Embedded segment over the coming years.
For Q4, AMD expects growth of 22% in revenue to land around $7.5 billion (plus or minus $300 million). Meanwhile, analysts expect revenue and earnings growth of 13.1% and 25.4% for the full year 2024. Revenue and earnings are expected to grow by 26.1% and 51.6% in 2025, respectively.
Trading at 23 times forward 2025 earnings, compared to the five-year historical average P/E of 75x, AMD stock is a reasonable AI stock to buy now.
Overall, Wall Street is bullish on AMD stock. Out of the 38 analysts that cover AMD, 29 rate it a “Strong Buy,” while one recommends a “Moderate Buy,” and eight recommend a “Hold.”
