Here's 3 High Growth Stocks With Limited Downside Today
Hi all 👋
This week, and the last few weeks, has shown us that the market is a bit uncertain where it wants to go.
On one hand we’re in the middle of a consumer spending slowdown (CMG & LULU earnings proved this), credit card debt spiralling, and still dangerously high government debt.
On the other hand AI capex continues up, margins continue to increase, and datacenter buildout continues.
Bigger picture, we are due a pullback. We just don’t know if it’ll be 2025, 2026, or even 2027. We keep seeing more and more of these short selloffs followed by a quick bounce back.
It’s eery whatever is happening.
Anyway, there’s 3 stocks today that I ultimately feel very comfortable buying. I think the multiples are already compressed quite substantially and I see the downside here being very limited compared to many other high growth stocks.
UiPath | PATH
I have a deep dive coming on PATH soon. Paid subscribers know it’s become quite a big part of my portfolio over the last 2 months and I think it’s now worthy of a deeper dive. I already have deep dives on many other companies in my portfolio, but PATH is one of the few large positions where I haven’t released one yet. So stay tuned for that.
The blue circles below highlight the approximate zones where I have been buying PATH. They aren’t my direct buys but they’re zones I like. The bottom blue circle is likely where I would add a very large position to PATH.
Here’s a bullet point overview of where PATH is right now:
AI Maestro is in the early stages but currently exploding.
Revenue growth rate is increasing, yet analyst estimates haven’t reflected this yet. Growth rate has gone from 5% to 14% over the last few quarters.
GAAP profitability.
Number 1 or number 2 player in agentic automation.
$0 in debt.
Stock down 81% over the last 5 years.
And finally, they’ve bought back $1B in shares since 2023 at an average price of $11.
PATH is a high growth company. Most high growth tech disruptors have struggled lately. We’ve seen LMND drop 8% on Thursday, HIMS down 34% in a month, and ZETA down 10% on Thursday alone.
Yet PATH…held up very nicely (+2.5% on the week at the time of writing this).
Why?
Because multiples are already incredibly compressed.
For PATH we have EBIT expected to grow at 42% in FY26 (very likely to be much higher if AI Maestro grows like many expect it to). Yet we have EBIT multiples at just 17x. Look through earnings are even below 12x.
For that growth rate, you rarely see multiples this small.
For this niche, you rarely see multiples this small.
Look at ServiceNow (NOW) for example. 26% FY26 EBIT growth rate (less than PATH), yet trading at 35.9x EV/EBIT (over double PATHs).
“We are at a unique point in history. Robotic process automation has long helped companies be more efficient by using software to emulate people as they perform well-defined tasks and following rules to achieve the same outcomes. Today, agentic AI offers a tremendous opportunity to extend the possibilities further across the enterprise.” - Daniel Dines (PATH CEO)
Shift4 Payments | FOUR
FOUR is a position that I have started to build recently as well alongside PATH as paid subscribers will know.
It’s not as big of a position as PATH, but I am interested in making it a lot larger. FOUR is another stock where I understand the risks (lower consumer spending, labour market slowing, merchant concentration etc), but I also understand that this is a company growing EBITDA at 44% whilst trading below 8x EBITDA.
“To that end, our board has authorized the new $1 billion stock repurchase program, which is the largest in our history. We will be implementing a plan to purchase at what we view as highly attractive levels right away.” - Taylor Lauber - CEO
Here’s my brief investment thesis for FOUR at todays levels 👇
Diversification across geographies and verticals.
Margin expansion
EBITDA margins are now ~50%
FCF margins are now 48%
EBITDA margins have expanded 600 bps over the last 3 years.
Huge wins across different geographies. They have just won contracts in Australia with ACOR and with Nobu Hotels.
$1B in run-rate adjusted FCF by Q4 2027.
The last bullet point is the most important. Let’s focus there.
If FOUR is able to reach this level of FCF, they’ll have grown FCF at 25% CAGR (at bare minimum). This is assuming $1B in FCF by 2028.
Given this growth rate, I suspect a FCF multiple between 20-25x is fair. So 20x FCF multiple on $1B FCF, we have a $25B company which offers around 4x opportunity today.
DLocal | DLO
DLO released earnings this week and the stock sold off ~8% which I was very surprised by. The main reason for the selloff was that take rates dropped due to one-time/non-recurring instances.
I want to be clear with this here. DLO’s 9 month take rate is now 2.72%. I have consistently stated my assumptions of a $40 PT given a 2.5% take rate.
Here’s my conservative assumptions:
TPV: Grows 25% CAGR (previously grown 40%) to reach $100B TPV by 2030.
Take Rate: Previously 4%, but now consistently ~3% (aside from this quarter). Conservatively, let’s say it stabilizes at 2.5%.
Revenue: $2.5B by 2030.
FCF Margin: Guidance gives us ~30% FCF margins by 2030 meaning ~$750M in FCF by 2030.
FCF Multiple: A high growth emerging fintech should command at least 15x FCF multiple.
This would give a $11.25B valuation (or a $38.3 share price based on current shares outstanding).
Conclusion
In my opinion, the three stocks I’ve spoken about here are already at compressed valuations. None of them have made big moves over the last few months and technically and fundamentally they remain very undervalued in my opinion.
These are the stocks I am going to try and load up on more over the coming weeks as well as a few others which my paid subs will be updated on.
I hope you enjoyed this article. If there’s any feedback or additional information that you think would be necessary, please do reach out to me and let me know or leave a comment below.