It's much harder to determine the fair value of a growth stock than a slow-growing company. Investors interested in taking on a little more risk with the potential for market-beating growth may be able to snatch up some undervalued growth stocks because the market's opinion of the true value of these companies is much more volatile. During a sell-off, these stocks could become undervalued relative to their long-term potential.
Undervalued growth stocks are shares of companies that have established strong businesses with competitive advantages and are still growing quickly. Market conditions may have presented temporary setbacks, resulting in a decline in share prices. Nonetheless, the long-term outlook for these companies remains strong, so they’re very likely to bounce back.
Six undervalued growth stocks in 2025
Six undervalued growth stocks in 2025
1. Uber
1. Uber
Uber (UBER -1.34%) is the largest ride-sharing company outside of China. It’s developed a network advantage due to the size of both its customer base, the number of people driving for it, and the number of restaurants and stores participating in its delivery service. All three are showing strong growth. What’s more, Uber One -- Uber’s subscription offering discounted rides, food, and beverages -- has more than 30 million members, strengthening its network effect.
Management expects gross bookings to climb at an annual rate in the mid-to-high teens between 2024 and 2026. In 2024, the company produced $163 billion in gross bookings. Based on management's outlook, users could book $223 billion worth of rides and deliveries by 2026. It’s not unreasonable to expect the enterprise value of a gig economy stock such as Uber to climb to a level equal to a 1x multiple of gross bookings.
Over the long term, Uber should see its gross margin expand as a result of its network effect, increasing Uber One subscriptions, and its growing advertising business. And, while it may invest in new areas that affect bottom-line profits, that’s exactly what a great growth company will do.
2. Meta Platforms
2. Meta Platforms
Meta Platforms (META -3.54%) is the largest social media company in the world. More than 3.3 billion people use at least one of its apps -- Facebook, Instagram, WhatsApp, or Messenger -- on a daily basis. Despite its considerable size and growing competition, Meta continues to expand its user base, indicating a strong network effect working in its favor.
Meta's management has focused its efforts on spending in areas with the biggest potential return for shareholders. Over the last few years, that's largely been artificial intelligence (AI). Meta's capital expenditures doubled from 2021 to 2024 and management plans to increase its budget about 60% in 2025, reaching as much as $65 billion. Meanwhile, the company continues to pour money into its Reality Labs division focused on augmented and virtual reality.
Meta's spending is paying off. Revenue is growing quickly, more than offsetting its costs. While depreciation expense will climb as it brings more AI data centers online, overall operating margin should remain stable as AI features fuel further revenue growth.
Despite the strong price performance of Meta stock over the last few years, it remains one of the few "Magnificent Seven" stocks that looks undervalued. Its enterprise value (EV) to earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio is around 15, which is less than other social media stocks and the average "Magnificent Seven" stock.
3. Etsy
3. Etsy
Etsy (ETSY -2.25%) has crafted a niche offering in the world of e-commerce. It’s the leading online marketplace for non-commoditized products such as crafts, used musical instruments, and vintage clothing. Its uniqueness helps Etsy stand out in a world dominated by internet retail giants such as Amazon (AMZN -2.58%). You go to Etsy for things you can’t find anywhere else.
Etsy got a massive boost from the COVID-19 pandemic, but it's currently undergoing a transition period to turn that one-time influx of customers into repeat purchasers. That comes with some short-term pain, but potential long-term gains.
Its focus on improving the customer experience includes things like establishing a loyalty program, building a greater focus on its marketplace to find unique gifts, and discouraging sellers from listing mass-produced products that all look alike. It's implemented new seller fees, transitioned to its own payments platform, and pushing its advertising services. The result is better operating margins despite lower gross merchandise sales.
Etsy shares have dropped amid the transition, but long-term investors may have a buying opportunity. Shares trade for an attractive price-earnings ratio relative to the stock's historic valuation. If the transition results in an acceleration in gross merchandise volume with stronger operating margins, it could see strong multiple expansion.
4. Taiwan Semiconductor Manufacturing
4. Taiwan Semiconductor Manufacturing
Taiwan Semiconductor Manufacturing (TSM -3.59%), or TSMC, is the world’s largest chip foundry. When a tech company designs a chip, they contact TSMC to produce it. That’s because the chipmaker not only has the facilities to pump out a lot of chips, but it also has the capability to produce some of the most advanced ones.
TSMC’s existing relationships with some of the biggest tech companies in the world allow it to confidently invest in research and development, creating a virtuous cycle where its customers design new chips using its leading-edge technology, which only TSMC has the capability to produce for them.
TSMC has benefitted from the growing spending on artificial intelligence. It's seen strong demand for its most advanced chipmaking processes, leading to margin expansion as it utilizes more of its facilities. It's planning to spend big to keep up with demand in the back half of the decade. Management increased its capital expenditure budget about 34% for 2025, and it expects average annual revenue growth of about 20% through the end of 2029.
Despite strong price performance over the last couple of years, TSMC stock still looks undervalued relative to management's long-term earnings outlook. There are some risks for TSMC, including geopolitical and cyclical risks, but its position as the leading chip foundry won't go anywhere. If management's forecast is correct, the stock should continue to march higher from here.
5. DraftKings
5. DraftKings
DraftKings (DKNG 0.0%) is one of the leading online sports betting and iGaming platforms in the United States. Despite the rapid growth in online gambling since its legalization in the U.S. in 2018, there could be a lot more room for the industry to expand as more states legalize it and more people gain interest. Goldman Sachs analysts expect the industry to reach $45 billion at maturity, quadruple the amount Americans gambled in 2023.
DraftKings is poised to win a significant portion of that market. It has a strong brand name and established partnerships with sports franchises and television networks. On top of that, its current leadership position in the industry gives it a meaningful data advantage.
User data can provide DraftKings with the ability to set more accurate betting lines while identifying sharp bettors. Both can help it mitigate losses on its end. It can also use data to develop and target promotions to encourage greater engagement with its platform over competitors. Lastly, data can help it develop new products. It's come out with live betting, more player-prop bets, and in-game parlays in just the last few years.
DraftKings only recently became profitable on an EBITDA basis. But management expects strong EBITDA margin expansion through the end of the decade as it scales its operations and demonstrates meaningful operating leverage. By 2028, management expects DraftKing's EBITDA margin to reach 30%, resulting in more than double the earnings from 2025 in the four-year period.
DraftKings current EBITDA multiple looks particularly attractive relative to management's expectations for EBITDA growth over the next few years.
Growth stocks are often undervalued during a broad market turndown, which can create ideal buying opportunities.
6. Celsius Holdings
6. Celsius Holdings
Celsius Holdings (CELH -0.98%) gave itself a shot of energy a few years ago when it partnered with PepsiCo (NYSE:PEP) for distribution in the United States. The new distribution agreement gave the energy drink maker broader reach in stores and better shelf space. But after a strong start to its relationship, PepsiCo adjusted its inventory levels lower in 2024, leading to a year of flat revenue for Celsius.
Nonetheless, management says it's continued gaining market share, as the rest of the industry has struggled as well. Sales to key retail partners including Amazon and Costco (COST -0.78%) have helped make up for weakness with PepsiCo. Additionally, the company still has a massive opportunity in international markets, where it's growing quickly. It recently launched sales in Canada, the U.K., Ireland, Australia, and New Zealand.
After the year of adjustments, Celsius is poised to continue growing, albeit at a much slower pace than in the early 2020s. Analysts expect the company to produce 15% revenue growth in 2025, and growth in the mid-teens is a reasonable expectation throughout the rest of the decade.
Meanwhile, Celsius should see improvements in gross margin in that period. The acquisition of Big Beverages should enable it to reduce manufacturing expenses and the ramp up of international sales should produce better leverage as well. As a result, earnings could grow even quicker than revenue.
But shares trade for an EV-to-EBITDA ratio in the mid-teens, which seems undervalued for a company that could grow earnings at close to 20% per year over the next five years or so.
Related investing topics
How to find them
How to find undervalued growth stocks
The opportunity to pick up shares of undervalued stocks often presents itself when there’s a broad market downturn or when a company faces temporary headwinds. But you can’t just buy any growth stock when trouble hits. You need to focus on companies with durable competitive advantages. These companies will have the strength to survive a downturn, and they’ll likely emerge from such periods even stronger than before.
If a company is trading well below its historical valuation because of a temporary setback but has the wherewithal to withstand a downturn, it could be a great opportunity for growth investors to pick up shares.
FAQs
Unvervalued Growth Stocks FAQ
What are undervalued growth stocks?
Undervalued growth stocks are shares of companies that are growing revenue and earnings at an above-average rate. Some may face temporary setbacks or see their stock price fall amid overall economic uncertainty, providing investors with an opportunity to buy them below their fair value.
How do you find undervalued growth stocks?
Maintaining a long-term outlook can help find undervalued growth stocks. Companies optimizing for growth can face setbacks or undergo transition years that lead to short-term negative results, but they also can set the business up for better long-term growth. If the market punishes the stock for poor results in one year, it can present an opportunity to buy the stock for less than its value.
Should I invest in growth stocks?
Investing in growth stocks is a great way to produce excellent long-term investment results, especially if you buy growth stocks when they're undervalued. However, growth stocks are generally more risky than slower-growing companies because they're harder to predict and valuations may prove inaccurate, creating more volatility in their value. If you can afford to hold volatile stocks for a long time, growth stocks could be for you.
