Finding undervalued growth stocks in the middle of a bull market is no easy task. By definition, they are investments rising in value over time. With the S&P 500 trading up about 25% so far this year, locating these discounted hidden gems remains a challenge but doable.
Just because a growth stock has gained in value doesn’t mean it can’t keep rising. Letting your winners run is a valid investment strategy because, like Newton’s Law of Motion, an object in motion tends to remain in motion. Unless a calamity strikes these growth stocks, there is a good chance they will keep right on rising.
Their growth also doesn’t mean they are anywhere near full valuation. A growth stock’s expansion may be outpacing the multiple the market is assigning. That’s the type of undervalued growth stock we’re looking for: its fundamentals are in place and widening just as it is beginning to realize its full potential.
Below are three undervalued growth stocks that fit the bill. Let’s dive in to see why they should be able to double in value by the end of 2025.
Turkcell Iletisim Hizmetleri (TKC)
The first question you might have about Turkcell Iletisim Hizmetleri (NYSE:TKC) is: who? The company is the leading mobile phone operator in Turkey but also provides broadband services to consumers and businesses, digital payment systems, cloud services and data center operations.
Turkey is an important emerging market that saw its economy expand 4.5% in 2023 despite a major earthquake early in the year that killed over 53,000 people and injured more than 107,000 people. Between 2002 and 2022, Turkey’s GDP increased by an average of 5.4% a year. Although economic growth is expected to slow this year to 3%, the World Bank expects “robust” growth in the years ahead.
Turkcell has been in business for 30 years, originally as a telecom operator but evolving into a significant technology provider. Its stock is up 71% in 2024 and has more than doubled over the last 12 months. Shares go for just eight times next year’s earnings estimates and Wall Street forecasts profits will rapidly expand at a 31% compounded annual growth rate (CAGR). TKC stock trades at a tiny fraction of that growth while going for less than twice its sales and a bargain-basement 5x free cash flow (FCF).
Turkcell Iletisim Hizmetleri might not be a household name but is a dramatically undervalued growth stock. It should readily double from its current $8 per share level, making it one of the best undervalued growth stocks to pick.
Genesis Energy (GEL)
Although Genesis Energy’s (NYSE:GEL) name might make you think it is a utility, in reality it is a midstream operator in the oil and gas industry. Headquartered in Houston, Genesis operates primarily around the Gulf coast region. It has one of the largest offshore pipeline networks in the Deepwater area; is one of the biggest sodium and soda ash producers; and is one of the largest crude and petroleum transportation providers serving two of the largest refinery complexes in the U.S.
Because it operates under long-term take-or-pay contracts, it means Genesis gets paid regardless of whether its customers accept delivery of its products or services or not. Those superlatives are not going without notice.
The midstream operator’s stock is up 24% in 2024 and 48% over the past year. Yet shares trade at 11 times earnings estimates and a fraction of its sales and projected earnings growth. Those profits are forecast to expand by 44% annually for the next five years.
The one complicating factor for Genesis investors is it is organized as a master limited partnership (MLP). That introduces potentially complex tax issues depending upon whether you invest through a taxable brokerage account or in an IRA. But if the stock meets your individual needs, GEL is an undervalued growth stock ready to double.
iShares S&P 500 Growth ETF (IVW)
Arguably the most surprising undervalued growth stock to buy is iShares S&P Growth ETF (NYSE:IVW), an exchange-traded fund (ETF) that tracks large U.S. companies whose earnings are expected to grow at an above-average rate relative to the market. Basically, it is an ETF growth stock tracking growth stocks.
What makes IVW a stock to buy is the likelihood the broad market itself will continue to appreciate in value. Federal Reserve chairman Jay Powell just said the central bank is taking a wait-and-see approach regarding inflation. What it sees so far is positive. That suggests the Fed could cut interest sooner than expected, which could unleash a massive groundswell of economic expansion.
By investing in the ETF, you get broad exposure to leading growth stocks, including Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL) and Nvidia (NASDAQ:NVDA), its three largest holdings. With a minuscule expense ratio of 0.18%, you also get them at low cost.
A single share of Microsoft stock goes for $460 per share versus IVW trading for less than $100 a pop. That means you can own a basket of the biggest growth stocks on the market at a significantly cheaper price.
On the date of publication, Rich Duprey did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.