These 5 Growth Stocks Are Absolute Steals Right Now

There are some phenomenal growth stocks in the market that continue to trade at really reasonable multiples. So, what are our favorites right now? I'm bringing on Lou Whiteman today to talk about our five favorite growth stocks in the market. I'm going to get things started here with Lou with one that I know you may disagree with just a little bit. That is Hims & Hers. Hims & Hers has more than doubled since its low when Novo Nordisk sued the company earlier this year. They're now buddies. They're now They're now partners. Hims & Hers also made an acquisition. They're going to grow potentially up to 50% in the second half of 2026. Company has a market cap of just under $9 billion. Enterprise value to sales is under four. Look, there are companies that are growing that quickly that are trading for 40 50 times sales. And yet, this is a company that's still small. It's in a It's It's trying to disrupt a massive space in health care. I mean, what are we measuring that in? Multiple trillions of dollars in opportunity, especially if we're going to use the kind of the the SpaceX TAM measurement. I I I just see this one as phenomenal risk reward for a growth company, and it has that DNA of growth and disruption. You know, a lot of people don't necessarily like how a company moves when they are in that disruptive phase, but they are. So, what do you think about Hims & Hers? >> So, there is a massive massive opportunity here. I agree with you on that. And this is an industry that definitely needs disruption. So, I'm kind of rooting for them or rooting for someone like them to do this. The thing is, though, health care is a very very dangerous area to play the move fast and break things game. And to some extent, Hims, you know, it's one thing to do If If you're Robinhood and you're just, you know, throwing stuff at the wall and see if it sticks. And yeah, that is people's money. But when you come with health and all of the regulations that go with it, plus people's health, there is danger. And this is I mean, I I I keep coming back to this, but this is the story of Icarus to me. You know, they are trying to fly high enough to get over the wall, but not fly too close to the sun. There is a very very little window there where it works out great. For now though, and look, I mean, they've done a good job trying to take control of their pharmacies for years. We've seen people try with the compound pharmacies. Little loophole from the law that allows these compound pharmacies to exist kind of outside the FDA back from the days of like, It's a Wonderful Life, when there were just people in local towns who were making drugs, and the FDA doesn't want to come and do those all the time. That's the tradition you're from. You have some shady players in there. Bringing Bringing supplies in-house helps with that problem. They are still though, they are trying to push a lot of buttons at a lot of people knowing that it's going to turn over some apple carts, hoping that at the end of the day they are left standing. They could be, but just I think, yes, huge reward opportunity, but you have to underline the risk that comes with it. This is a tough industry to disrupt, and they got their work cut out for them. >> Yeah, one of the two things I want to highlight here. First is kind of the the business model and the history of aggregators is what we would call them. So, like Netflix for example, did not make their own content for for quite a while. So, Hims & Hers, you can kind of look at it that in the People are choosing to interact with the Hims & Hers app just like they were choosing to interact with Netflix or with Uber. So, that's the that's potentially the power there is that the eyeballs are going to Hims & Hers rather than going to Eli Lilly or going to, you know, a doctor, which is a little bit more of a pain to get a prescription or something like that. So, that's one thing I have want to highlight from a strategic perspective. The other thing is over the last 6 months, they've made a pretty big shift, especially in weight loss in particular, and that's where I think they got in kind of the most hot water with Eli Lilly with with compounding, and I don't know that's something you've been critical of in the past, but they've made that shift to a subscription model that will actually give you access to the branded medications. Now, that was kind of a here's the deal that we're going to make with the existing pharmaceutical industry. So, we'll we'll stop compounding as much as we were, actually wrote off some of those assets, and now they're prescribing primarily those branded assets. So, you know, maybe a little bit of a shift to the the more branded FDA approved, as you say, because compounding is kind of this wonky uh carve out. But, as they have more and more of those products on on their platform, I think that could potentially insulate them from any of those individual risks. Cuz you do you look throughout Hims & Hers history, it was the ED company to start with. Then, it was the weight loss company. Now, you know, it's it's doing more and more of everything. Now, you know, I get my labs done through them. They're They're building these AI tools. We don't know exactly what that's going to look like. But, again, when you look at the future of healthcare, physically going to the doctor, physically then going to the pharmacy, you know, all these things are this the entire story of tech is taking friction out of the system. I just think they're heading in the right direction. And, you know, it's a relatively small company taking on a lot of big players. But, if they're able to play nice with them long enough, like Netflix was able to play nice with Disney, and, you know, Stars and companies like that, that could put them in a potentially a really good position long term. I'm going to take just a quick second to tell you about Motley Fool's Epic services. Got everything you need to build a powerhouse portfolio minus the Wall Street stuff. Premium stock picks, elite research tools, and battle-tested strategies. If you want access to Motley Fool Epic, go to fool.com/epic-50. That's fool.com/epic-50. All right, let's go to your first pick. That is Rocket Lab. >> Right. And, it's it's not as, you know, overvalued, quote unquote, as it was just a few months ago. It's trading at about 70 times sale sales right now, though. We have to say sales because there is no earnings yet yet. Though, we might be closer than I thought there. Stock is up 1,400% over the last 3 years. I can't justify today's valuation based on today's business. However, I see a clear path where if they execute, I think it's a much easier story than say Hims in my mind of how a company can go from where they are today to much bigger in the future. The big story in space, the under-appreciated story in space is the cost to get to space is rapidly going down. And as the cost of space goes down, more and more smart people are going to figure out ways to use space. It's very similar to what we saw in 1999 with the internet, where distribution costs just got blown out by the internet. And maybe you didn't predict that some guy in at Harvard right there was going to create social media, but the point is is that smart people were able to use these lower distribution costs to try something. Rocket Lab is an infrastructure company at heart. And so they you don't have to bet on which application in space works, whether it's growing organs or data centers or solar energy that beam back down to Earth. They have a role in everything getting there and seeing what sticks. They just bought Iridium. That might actually solve the E problem because Iridium is a very, very profitable company, a well-run company. Uh look, Rocket Lab burned through about $300 in cash last year. Iridium generated about $300 in cash. So, you know, there is a real way to use here, maybe an overvalued currency to buy cash flow and self-fund some of your growth. I look, a lot can go wrong here. It's literally rocket science, but I really, really, really like this opportunity. >> What about the potential opportunity and the players? I look at something like Rocket Lab. It's it's extremely expensive, but it's also you got SpaceX there. You have Blue Origin is you know, maybe falling into a third far behind in third place. I think there's another player in India. It just seems like this is not a business where there's going to be one winner and you can't really own space uh per se. So, is that a concern that eventually there's going to be so many rockets going up that it's just going to be a commodity? >> So, right now, that would be a dream. Right now, we have a real undersupply in capacity. SpaceX is by far the biggest rocket launcher, but most of theirs is being, you know, used in-house by Starlink. In fact, the economics of Starlink would look a lot different if they actually had to pay for their launch capabilities. They're also in different parts of the cycle. You know, what Rocket Lab, even when the Neutron hopefully gets here, it's going to still be launching payloads a lot smaller than what the Falcon Heavy can do. Yes, there is the long-term risk for commoditization, but we are a long ways off from that. The other thing to note about Rocket Lab is is that launch, despite the name, is just a tiny part of the business. Their real value proposition is they are the end-to-end space company. There are reasons for, I don't know, pick your company, Target, to be in space. It isn't going to hire a team of rocket scientists. They are going to outsource that. And with Rocket Lab, you can deal with one vendor to design your satellite, build your satellite, launch your satellite, and maintain your satellite. I think that's a great value proposition for corporate America versus just, you know, dealing with 37 different suppliers. I think they're pretty well positioned even in a world where launch capacity is ample. If anything, again, if we if launch capacity is ample, the costs come down and who knows what people are going to want to do with it then. >> Definitely an interesting one to watch. Uh been on my watch list, but I have not pulled the trigger on that one yet. All right, let's go to the third stock. That is Zeta Global. If you're not familiar with Zeta Global, this is an artificial intelligence marketing tool. At least, that's what they were until earlier this week. Uh what they do is they've got their own proprietary data. They combine that with the customers that they're working with data. Most of those customers are going to be some of the biggest companies in the world. You know, Gap was announced as a recent customer. Uh Nike, you know, the the companies that are spending hundreds of millions of dollars on advertising. Where do you put those dollars? Do you put them on Google? Who do you target? Do you put it on Facebook? Who do you target there? What Zeta Global does is basically takes all that information and then helps you optimize where you're actually targeting those advertisements. And the new Athena product allows you to do that with just voice. So, you can sit and talk to Athena and go, "Hey, you know what? I've got a marketing goal. I need to uh you know, I have a budget of $10 million and I need uh 10x return on that investment." And it'll help you find those opportunities. Now, the interesting thing is that has driven the business 25% compound annual growth rate over the past 5 years. They're nearly uh profitable at this point. Uh should be profitable over the next year. Expecting a a forward price earnings multiple of about 21. But, they also recently signed a deal with Palantir and they announced that they're going to be much more of a business intelligence platform in the future. So, now pull in not just your marketing data, but also your business data. What's going on with your business? Where can you optimize? Things like that. So, when I look at artificial intelligence and the application layer, this is one of the really interesting companies to me. And it's not a trillion-dollar company. It's a five-billion-dollar company growing this quickly, showing 50% revenue growth in the most recent quarter. So, there's momentum there. Or if we start to see that free cash flow start to come in, the operating leverage start to kick in, I think this is a potentially really, really great opportunity in artificial intelligence with those applications. You know, the model layer, not really something I'm interested building out in the CapEx, there's plenty of companies doing that, but this is one of the leaders in that space. >> I think if nothing else, you're hunting in the right uh right area here cuz I agree with you, the model makers, I don't know what to think of that. It feels like if it all goes to script, there's going to be at least some commoditization. But there's a there there with AI, right? There are companies that are going to use AI to do neat things. That application layer and a company that kind of wants to do that at scale, it's very intriguing. I think Zeta could be a winner, but even if they're not, I I I I just if nothing else, I think this is the part of AI that does intrigue me. So, this is a really interesting company as you say, pretty reasonable relative to some of uh you know, the just >> Yeah. multiples and um and market caps we're dealing with with AI. >> All right, let's go a little bit more stretched on a valuation standpoint, but a company with a lot going in its direction, Eli Lilly. What do you like about Lilly right now? >> So, Eli Eli Lilly has emerged as the GLP king, I think. King, queen, whole court. What they have done there is amazing. And look, what they still have in the pipeline is amazing. So, this isn't a one-hit wonder. They are taking the science and stretching it all over the place in ways that I don't know, doesn't seem shady to me. I mean, again, you know, what we're talking about, this is good old-fashioned pharma. So, there is a real good revenue stream here. The issue is, and then I'm old enough to remember the statin revolution and different revolutions, the nature of this business is is that you are always trying to outrun patent expiration. And so, even the greatest blockbuster drugs don't really give you a sustained advantage as a company. That was Pfizer back then with this the the stand revolution. It didn't turn them into alphabet. That you know, so that's the issue. Now Eli Lilly is addressing this in two ways. For one, they are continuing to refine GOPs and the fact that this is kind of just a new category gives them some with every new version they can push out that window. But more importantly, they aren't sitting on this cash. They are buying it feels like everything in sight. Travis, I feel like you and I could start >> and Eli Lilly would you know, with milestone. So it might not get us rich, but might buy it today. They are trying to future proof themselves in an industry that is terrible when it comes to R&D efficiency where most things you try fail. For them to basically try to use this massive amount of cash that GLP-1s are giving them to to cheat, to get in phase in process developing drugs instead of just starting from scratch. >> I think it's brilliant. Stocks only up 160% over the last 3 years. 44 times earnings. This isn't cheap for a pharma and again, this has always been a business that it is impossible to sustain just because of the way the law works, but they are doing about the best someone can do I think to sustain and I just I can't say enough good about them. >> And my only caution is that valuation. You know, 16 17 times sales for a company that is in the pharmaceutical business that is going to have to keep reinventing itself with R&D. But the tailwinds that they have even that we know that are in the pipeline. I mean retatrutide is said that could be a trillion dollar drug and I believe it. You look at the results from their from their studies that that we've we've seen so far. That will likely come to the market I think next year is what we're kind of expecting from retatrutide. That is going to I mean I mean I don't think we've seen a drug that will hit and and go mass market as quickly since Viagra. Uh I don't know if that was 20 or 30 years ago at this point, but that is going to go absolutely mass market. I think it's something like 20 million Americans are already on a GLP-1. This is going to be even more effective by all reports that we've seen, uh more use cases, not just weight loss, but, you know, all kinds of different health benefits. So, a lot going for them for them, and I agree. They're buying up all kinds of companies, but that's how you get the next big thing. The other thing to keep in mind is peptides in general. Uh don't know exactly what role they're going to play, but GLP-1s are peptides. And so, they understand those peptides potentially better than anybody else. Are they able to, you know, extract some value there? Uh we'll we'll see. But, there as that gains more interest, I think that's going to open up the market as well. Let's go to our fifth and final stock. That is one that I've been generally confused why the market doesn't like it more. That is On Holding. This is This is a company that is taking market share from companies like Nike. You want to look at why Nike is down, why they're losing share in, you know, particularly direct-to-consumer, why they're struggling at least long-term in the wholesale market, look at On Holding. And yet, the company trades for just three times sales, just 22 times forward earnings estimates, but yet they're growing at 20-plus percent. It's a little bit confusing because they report their results in Swiss francs. This is something that you can you can look at the reaction after earnings, and sometimes the stock will go down 10-15% and then the next day it'll recovery because the market goes, "Oh, that's right. That That negative number was actually a positive number when you convert it to US dollars." So, it does make things a little bit confusing to follow with On Holding, but no one has more pricing power. They said a couple of years ago they wanted to get to 60% gross margin. I think they're at 63% now. They have pricing power despite things like tariffs. You know, they went out and said, "Hey, you know what? If there's tariffs and we got added cost, we'll just raise our prices." Guess what? Nike can't do that. Under Armour can't do that. On can. They're still growing its most popular shoe in kind of suburban soccer mom. And guess who buys the shoes for the for the family? It's that soccer mom. So, that's where I found out about them cuz my wife bought me a bought me a pair. Now we've got a number of pairs throughout the house. And you know, if that's any indication that this growth should continue. >> Yeah, and it is, you're right. I mean, they are actually kind of looked down upon by like the competitive runners, but I'd rather have the you know, like like kind of the non-competitive fashion and and they have got that. The The question is with all of these is you could have said the same thing about Lululemon a few years ago. And these things tend to work until they don't. And I look, fashion is fickle. They have a good company, a well-run company, but yes, today they can power through tariffs, they can power through almost everything. I don't believe that lasts forever. What I don't know is whether or not it lasts one more quarter or five more years. And that very much changes the outlook on whether or not you want to buy the stock. And again, I might just be showing my ignorance. I would not short the stock with your money, Travis. So, I am not I'm not predicting gloom and doom here, but I do think that we do have to acknowledge that this is in part a fashion story and fashion is really really hard to invest long term in. >> The other one of the questions that the market has had about the company is about leadership. Uh they've had some CEO moves around. Uh the the current CEO or co-CEOs, I forget exactly where we're at in this moment, but are actually the founders of the company. So, it's been a little bit of a strange story. >> Right, right. That's That is true. There was I think five >> like six founders. >> Yeah. But But there was having those founders still involved in the company it give me a little bit more hope long-term that the story is where we want it want it to go as long-term investors. I can see how you start a company, you know, it gets too big, you you you just aren't ready to go from building something in your garage to running a multi-billion dollar international company. And then, you know, 10 years later, maybe you go, "Hey, it's time for me to step back in and do the things that I need to do as the the founder that only I can do." I I'm I'm a little bit hopeful there. It's it to me it's better than bringing in somebody from elsewhere uh like Nike has done. I think those strategies have not really worked. So, hopefully this is the right strategy and the right people involved to make the decisions that On Holding needs to uh and and they have a little bit more stability at the top. But, I just I always want to remind people that these people are it's not like they're bringing in somebody from the outside. They were on the board of directors, they're involved in the in the company. They just weren't running the day-to-day operations. Now, those founders have have kind of stepped back into more operational roles. So, turmoil at the top, but maybe not as bad once you actually understand who these people are. Let us know what you think about these growth stocks: Hims and Hers, Rocket Lab, Zeta Global, Eli Lilly, and On Holdings. Which one's your favorite? Leave your comments in the comment section below. Don't forget to subscribe here to the Motley Fool's channel on YouTube. Thanks for watching, everybody. See you here next time.