Sometimes when you research stocks you find names that are appealing in one aspect but weak on another. For instance, you find a stock with powerful momentum, but it has a premium valuation. Or you find something with a discount valuation, but it keeps trading lower. That isn’t the case here.
The three stocks I have identified today hit all the important factors that I am looking for; breakout momentum, discount valuations, impressive earnings growth and top Zacks Ranks.
Stride (LRN), COHERENT CORP (COHR) and Twilio (TWLO) are some of the most compelling opportunities in the market today.
Image Source: Zacks Investment Research
Twilio: Stock is Staging a Major Comeback
Back in 2021, Twilio was one of these high-flying mid-cap tech stocks that was trading at uber-rich valuations before getting slammed in 2022. At the end of 2022, TWLO stock was down 90% from its all-time high. But now it is rising from the ashes, with a reasonable valuation, strong growth and a Zacks Ranks #1 (Strong Buy) rating.
Twilio is a cloud communications platform company that enables businesses to integrate messaging, voice, and video capabilities directly into their applications. Known for its extensive APIs (application programming interfaces), Twilio allows developers to embed these functions seamlessly, enhancing customer engagement and support through automated messaging, authentication services, and more.
Today, Twilio is trading at a one-year forward earnings multiple of 25.8x, while earnings are forecast to grow 41.8% annually over the next three to five years. That gives TWLO a PEG ratio of just 0.62, a discount based on the metric.
In the chart below we can see that TWLO stock recently broke out from a massive stage one base, indicating that there may be a big bull run coming for this fast-growing technology stock.
Image Source: TradingView
COHERENT CORP: Huge Earnings Growth Forecasts
COHERENT CORP is a fascinating company, specializing in advanced materials, optics, and photonics solutions for industries such as communications, aerospace, and healthcare. Coherent’s diverse product line includes lasers, optics, materials, and components essential for next-gen applications in optical communications, industrial lasers, semiconductor fabrication, and quantum computing.
Coherent plays a vital role in areas like 5G network expansion, electric vehicles, and medical devices, positioning itself as a key supplier in the transition to more digitally connected and energy-efficient systems.
Like the others, COHERENT CORP boasts a Zacks Rank #1 (Strong Buy) rating, and powerful momentum pushing it to new highs. The stock is up 140% year-to-date (YTD).
However, while the huge advance in the stock price may steer some investors away, worried that the gains have already occurred, I am less concerned. COHR still enjoys a reasonable valuation and tremendous growth forecasts.
Earnings are projected to grow 45% annually over the next three to five years, while the company has a forward earnings multiple of 36x. That gives it a PEG ratio of 0.82. This reasonable valuation discounted for growth makes me far less worried that the stock will correct aggressively.
Image Source: Zacks Investment Research
Stride: Shares are Cheap Relative to Growth
Stride is another very interesting stock. It is an education technology company that provides online and blended learning solutions, primarily for K-12 students. The company partners with public and private schools, delivering curriculum, digital learning tools, and instructional services through its proprietary platform. Stride’s flexible learning model offers students personalized, self-paced education options that accommodate diverse learning needs.
Stride too has a Zacks Rank #1 (Strong Buy) rating, reflecting strongly trending earnings revisions. FY24 earnings estimates have increased by 32% in the last 60 days and FY25 have jumped by 32.8% over the same period.
Furthermore, LRN is trading at a one year forward earnings multiple of 15.5x, which is well below the industry average. Finally, With EPS forecast to grow 20% annually over the next three to five years, it has a PEG ratio of 0.77.
Image Source: Zacks Investment Research
Should Investors Buy Shares in LRN, COHR and TWLO?
For investors seeking balanced exposure to value, growth, and momentum, Stride, Coherent Corp, and Twilio offer compelling opportunities in a range of industries. Each of these companies demonstrates substantial earnings growth and favorable valuations, making them less vulnerable to downturns compared to many high-momentum stocks.
With significant momentum behind them, shareholders should remain vigilant and actively manage their positions. While these stocks appear less risky than most momentum plays due to their reasonable valuations, investors should always prioritize sound risk management.
— Ethan Feller
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Source: Zacks