3 Growth Stocks With Superior Fundamentals

Stocks to buy

Investors looking for the best growth stocks to buy often focus on large-cap companies with robust fundamentals, a strong balance sheet and swelling cash flows.

On the other hand, companies in the growth stage have moderate fundamentals and cash burn does not come as a surprise. However, fundamentals can’t be completely ignored while selecting growth stocks to buy.

I believe that there are several growth stocks to buy that have robust fundamentals. These companies might still be in a phase of cash burn, but have a robust cash buffer and improving EBITDA margins.

Let’s talk about three growth stocks to buy with superior fundamentals.

XPeng

Source: Koshiro K / Shutterstock

XPeng (NYSE:XPEV) has corrected significantly in the last six months. Even with some near-term headwinds, the long-term outlook for this EV stock is bright.

XPeng reported a cash buffer of $6.2 billion as of Q2 2022. The liquidity ensures that the company is fully financed for the next 12-24 months.

I also believe that XPeng is positioned for healthy margin expansion once inflationary headwinds wane.

Amidst multiple headwinds, XPeng has reported a 96% year-over-year increase in vehicle deliveries in the first eight months of 2022. The company is expected to launch G9 SUV in Q4 2022. Additionally, two more models are in the pipeline for launch in 2023.

This is likely to ensure the robust deliveries growth sustains. At the same time, margin expansion seems likely with economies of scale. The EBITDA margin improvement will translate into XPEV stock upside.

Overall, XPEV stock is among the seriously undervalued growth stocks to buy with solid fundamentals. Long-term industry tailwinds add to the positives.

Coupang

Source: Michael Vi / Shutterstock.com

With relatively lower growth expectations in a post-pandemic world, e-commerce stocks have been in a correction mode. This has presented some attractive long-term investment opportunities.

Coupang (NYSE:CPNG) stock is possibly among the top names to consider from the sector from a valuation perspective. After declining to 52-week lows of $9, CPNG stock has seen a sharp reversal. This is backed by fundamental factors and I expect the upside to sustain.

In terms of business fundamentals, there are two important points to note. First, Coupang reported cash and equivalents of $3.1 billion for Q2 2022. The company has ample financial flexibility to pursue aggressive growth in Korea and Southeast Asia.

Furthermore, Coupang has revised its adjusted EBITDA guidance for 2022. The company now expects to report a positive adjusted EBITDA. With economies of scale, it’s likely that EBITDA margin improvement will sustain. This provides visibility for robust cash flows in the next few years.

Pinterest

Source: Ink Drop / shutterstock

Pinterest (NYSE:PINS) stock has declined significantly from all-time highs. However, the stock has traded sideways in the last six months. This is a potential indication that the stock has bottomed out. I believe that Pinterest has strong fundamentals and the stock is poised for a reversal rally.

For Q2 2022, Pinterest reported 9% revenue growth on a year-on-year basis. For the same period, revenue growth from the rest of the world (excluding U.S. and Europe) was 71%.

With average revenue per user of 10 cents for the rest of the world, there is ample headroom for ARPU growth. Over the next few years, global markets will support top-line growth and cash flow upside.

It’s worth noting that as of Q2 2022, the company reported $2.6 billion in cash and equivalents. The company also reported an operating cash flow of $333 million for the first six months of 2022.

Therefore, there is ample financial flexibility for investment in platform development. Pinterest is already focused on making the platform shopping friendly. With global reach, the proxy e-commerce play has a bright outlook.

On the date of publication, Faisal Humayun 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.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

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