3 Mid-Cap Growth Stocks With Significant Long-Term Upside

Investing in stocks with modest valuations can set investors up for some significant returns in the long run. While there is more risk involved in putting money into smaller, less-established businesses, the upside can also be considerable, potentially resulting in massive gains.

Three mid-cap stocks that may have a lot of room to rise higher in the future are Archer Aviation (ACHR), CRISPR Therapeutics (CRSP), and e.l.f. Beauty (ELF). Here are the big risks and opportunities that come with these stocks.

Archer Aviation
Archer hopes to be a leading player in the electric vertical take-off and landing (eVTOL) industry, potentially revolutionizing how people travel and commute. It hasn’t obtained certification for its Midnight aircraft yet, and it may still incur sizable losses for multiple years. For investors, that means the risk of frequent stock offerings and heavy dilution can’t be overlooked.

But there is considerable potential in the space as air taxis could alleviate traffic in major cities. Last week, Archer also revealed new aircraft it has been developing with Anduril: Thunder, which can serve defense applications, and Halo, suited for commercial needs. Both are autonomous and can take on heavy payloads.

Archer’s stock has struggled this year, falling 38% thus far. But with a market cap of roughly $3.6 billion, it’s not all that big given the massive opportunities it has on the horizon. It’s by no means a risk-free investment, and it likely won’t be suitable for most investors, but for those who have a high tolerance for risk and who are willing to be patient, it could be an intriguing buy right now.

CRISPR Therapeutics
Healthcare company CRISPR Therapeutics is a small but promising player in the gene therapy market. It has developed Casgevy along with its partner, Vertex Pharmaceuticals. Casgevy is approved to treat a couple of rare blood disorders: sickle cell disease and beta thalassemia. It’s such a game changer for patients that experts believe it’s still a cost-efficient option at a price of $2.2 million for a one-time treatment.

CRISPR is in the early stages of rolling out Casgevy, and thus its financials still resemble those of a biotech stock with plenty of risk; it incurred a net loss of $123 million during the first three months of the year. But with promising growth prospects related to Casgevy, and many therapies still in the midst of clinical trials, CRISPR offers attractive upside and may even be an acquisition target for a larger healthcare company in the future.

Year to date, CRISPR’s stock is down 12% as investors may have become frustrated with its slow progress. But for patient investors, this company, valued at around $4.5 billion, could prove to be an underrated long-term investment.

e.l.f. Beauty
Cosmetics company e.l.f. Beauty is in the best financial shape of the stocks listed here. Tariffs and trade wars have weighed on its business, but overall, the company has been doing well. In its most recent fiscal year, which ended on March 31, net sales of $1.6 billion rose by 25%, and its adjusted net income totaled $185.9 million.

While e.l.f. has been a top growth stock to own in the past, concerns around tariffs have made investors more bearish on it of late. In the past 12 months, it has declined by 30%, with its valuation falling to $4.9 billion.

Based on analyst estimates, the stock is trading at 25 times its future earnings. While that might be higher than the S&P 500 average of 21, forward earnings multiples only look at the year ahead. With e.l.f. Being a potentially big disruptor in the cosmetics space, offering affordable, low-cost options for consumers, it has plenty of growth ahead in the long run.

— David Jagielski

Source: The Motley Fool