While dividend shares can be very solid long-term investments, growth stocks are typically where the big money is made in the stock market. With these investments, ‘multibaggers’ (that is, stocks that go up by many times their initial cost) are a real possibility.
Here, I’m going to highlight two growth stocks where I see multibagger potential. Could these names be worth considering to try and turbocharge an ISA or SIPP?
A rival to SpaceX
Two things I look for when seeking out multibaggers are strong revenue growth and a relatively low market cap. The top-line growth demonstrates that the business has an expanding market opportunity – and the operational capacity to capture it – while a smaller market cap means that the company doesn’t need to conquer the world for its stock price to rise exponentially.
Now, one company that meets this criteria is Rocket Lab (NASDAQ: RKLB). It’s a space company that offers rocket launch services and also has a comprehensive spacecraft components business.
The growth here is very impressive. Over the last three years, the company’s revenue has nearly tripled to $602m.
As for its market cap, it’s $48bn. That’s high by UK standards but quite low by US standards, and a fraction of the size of SpaceX’s market cap ($1.9trn).
Looking ahead, this company definitely has the potential to get much bigger. One thing that could boost growth is SpaceX’s plan to offer fewer launch services for other customers.
This could lead to higher demand for Rocket Lab’s services. Note that at the end of Q2 it had a backlog worth $2.4bn.
I’ll point out that this stock is very volatile. Top-line growth isn’t linear so investors shouldn’t expect it to go up in a straight line.
If the company can grow its top line significantly in the years ahead however, the share price should rise. Taking a long-term view, it could rise many times over so I reckon it’s worth a look.
A play on self-driving cars and humanoid robots
Another growth stock that meets this criteria is Hesai (NASDAQ: HSAI). It’s a small Chinese company that specialises in LiDAR technology (remote sensing tech that uses laser light pulses to measure distances) and has a dominant position in the market.
Over the last three years, its top line has risen around 150% so the company is growing quickly. Looking ahead, there’s still a huge growth runway as a lot of self-driving cars and humanoid robots are going to use LiDAR.
As for its market cap, it’s just $2.9bn. So this is a really small company today.
One added attraction here is that it has a relatively low valuation compared to its growth – the price-to-earnings (P/E) ratio is roughly 25. This is a plus from a multibagger-hunting perspective as gains could come from an increase in the valuation.
Now, like a lot of potential multibaggers, this is a really risky stock. Some key risks that could impact the business include competition from rivals (and price wars), alternative sensing technologies, supply chain disruption, and geopolitical friction.
I do see a lot of potential in the long run though. So, I think it’s worthy of further research.
Should you invest £5,000 in Rocket Lab right now?
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And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Rocket Lab made the list?
Edward Sheldon owns shares in Hesai.
