These Growth Stocks Are Still Cheap - Aug 25

The Big Picture

Some S&P 500 growth names are trading meaningfully below their long-term price-to-sales averages even as the broader market's price-to-sales sits near record highs. Examples from the screening include stocks trading near $382.41 and $373.31, highlighting that pockets of relative value still exist.

For investors, that means you may be able to find growth exposure without paying the rich multiples that now price much of the index.

What's Happening

MarketWatch ran a screen of S&P 500 constituents to identify growth-oriented companies that look inexpensive on a price-to-sales basis versus their long-term history. The screen flagged 11 stocks in total, with three names highlighted for particularly attractive relative valuations and strong forward revenue projections through 2028.

• Screen count: 11 S&P 500 companies passed the price/sales vs. long-term average test, offering a narrow pool of cheaper growth candidates.
• Valuation context: the broader S&P 500 price-to-sales valuation is described as near a record high, heightening the value of names that trade below their long-term P/S norms.
• Revenue outlook: analyst estimates cited in the screen show projected revenue growth rates such as 10% and 7% for selected names through the forecast window, implying durable top-line momentum.
• Additional data points used in the analysis include 0% and 3.1% deviations on select valuation measures, a benchmark figure of 14 used to convey elevated market-level valuation, and company-level figures near $11.6 per-share for an operating metric the screen considered.
• Representative share-price examples from the flagged universe include stocks trading around $382.41 and $373.31, which illustrates that relatively expensive nominal prices can still present value once scaled by sales and growth expectations.

The combination of below-average P/S multiples and multi-year revenue growth projections is the central reason these companies stood out. Analysts referenced by the screen expect continued expansion in sales, which supports the claim that these names are inexpensive on a growth-adjusted basis.

Why It Matters For Your Portfolio

Finding growth stocks that trade below their long-term price-to-sales ratios matters because it gives you a way to seek growth exposure without automatically accepting the market's high aggregate valuation. If you own broad index exposure, these names could serve as selective complements rather than replacements.

Who should care: growth investors hunting for better entry multiples, value-minded investors looking for growth at a reasonable price, and traders seeking mean-reversion opportunities. You can also compare these cheaper growth names to large cap growth leaders such as $AAPL or $NVDA when assessing relative P/S and revenue momentum, though the screen focuses on less richly priced candidates.

Risks To Consider

• Valuation compression: Even if a company trades below its long-term P/S, broader multiple contraction on macro or sentiment shifts could push its price lower, creating losses before revenue growth materializes.
• Execution risk: The bullish case relies on projected revenue growth of roughly 10% and 7% for highlighted names; missed top-line targets would undermine the relative-value thesis.
• Concentration and liquidity: The screen identified just 11 names, and three were singled out. Narrow pools can mean higher idiosyncratic risk and greater volatility than the broad S&P 500.

What To Watch Next

Focus on upcoming company and macro catalysts that will validate or challenge the cheap-growth thesis. Key metrics and price levels will guide whether these names remain attractive on a risk-adjusted basis.

• Quarterly revenue and guidance, where beats or raised outlooks would support current relative valuations; misses would increase downside risk.
• Changes in price-to-sales trends, such as moves back toward the long-term average (monitor deviations like 0% and 3.1% cited in the screen).
• Market-level valuation shifts: if the S&P 500 price-to-sales retreats from its near-record level, the relative attractiveness of these names could change quickly.
• Specific share-price levels to watch include the example prices near $382.41 and $373.31 for position sizing and stop planning, and per-share operating metric levels around $11.6 used in the screen.

The Bottom Line

• Selected growth stocks in the S&P 500 are trading below their long-term price-to-sales ratios, offering relative-value opportunities in a richly priced market.
• Analyst projections showing multi-year revenue growth, including figures around 10% and 7%, underpin the case but also add execution risk if targets are missed.
• Monitor upcoming revenue prints, P/S deviations, and market valuation trends; these are the clearest signals that will change the risk/reward picture.
• Use position sizing and stop disciplines given the concentrated nature of the opportunity and the narrow screen universe of 11 names.

FAQ

Q: How did the screen define "cheap" growth stocks?

A: The screen compared current price-to-sales ratios to long-term averages and flagged S&P 500 stocks trading below those historical norms while also looking at forward revenue estimates through 2028.

Q: What metrics should I watch to validate these picks?

A: Watch quarterly revenue growth and guidance, any changes in company-level price-to-sales versus long-term averages (the screen referenced deviations like 0% and 3.1%), and overall S&P 500 price-to-sales momentum.

Q: Do these names remove market risk tied to a high S&P 500 valuation?

A: Not entirely. While lower relative P/S can reduce valuation risk for individual names, market-wide multiple compression can still hurt prices, so monitor both stock-specific execution and broader valuation trends.