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Growth Stocks: Buy, Sell or Hold?

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Welcome to Episode #195 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

This week, Tracey is going solo to talk about growth stocks. Most investors own them. FAANG defines this era. And it’s hard to believe that this huge rally in growth stocks could ever end.

But over the last several months some of the growth stocks have begun to tread water or even started declining.

Should you sell and cash in or should you hold on?

What about buying more?

When Growth Hits a Speed Bump

Some growth stocks have hit speed bumps recently. A good example is Ulta (ULTA - Free Report) . The beauty retailer was a big growth winner, with the stock gaining over 200% in the last 5 years until it warned last quarter on guidance.

That warning sent the shares spiraling down. Over the last month, they have fallen 28%.

Now the forward P/E is just 19.9 and it has a PEG of 1.2. It still expects double digit sales and earnings growth this year.

Netflix (NFLX - Free Report) is another growth stock that has hit a speed bump. It has fallen 31% over the last year.

It’s forward P/E has also fallen, along with the stock, to just 81x.

Growth is still healthy. Earnings are expected to be up 21.3% this year and another 76.9% next year. Revenue is also expected to be up 28% in 2019 and another 24% in 2020.

Is this a buying opportunity?

There are other growth stocks that still have solid fundamentals that look interesting, especially if growth stocks tread water or pull back.

3 Growth Stocks with Double Digit Earnings and Sales Growth

1.       Alphabet (GOOGL - Free Report) is one of the growth stocks that is up in 2019. Shares have jumped 16.9% year-to-date. Despite its size, it is still generating over 20% a year in sales growth. Analysts expect revenue to rise 20.3% in 2019.

2.       Funko (FNKO - Free Report) makes pop culture consumer products including action figures, accessories and apparel and board games. While sales are expected to rise 22.9% and earnings 49% in 2019, it has an attractive valuation with a PEG ratio of just 0.8. Shares have sold off 8.3% over the last month.

3.       EPAM Systems (EPAM - Free Report) operates in software and digital platform engineering, design and consulting. Year-to-date, the shares are up 56% but over the last month they have faltered a bit, falling 4.3%. It’s expected to see 21% earnings growth and 23% sales growth this year and next.

What else should you know about buying growth stocks in 2019?

Listen to this week’s podcast to find out.

[In full disclosure, the author of this article owns shares of ULTA, FNKO and GOOGL in her personal portfolio.]

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