Key Takeaways
- A specific cohort of companies presents a rare investment profile: sustained profitability, annualised three-year revenue growth exceeding 40%, and price-to-sales ratios below, or near, 7x.
- This group, including Super Micro, MercadoLibre, Oscar Health, and Cadeler, spans disparate sectors from AI infrastructure and Latin American e-commerce to insurtech and offshore wind energy.
- The turn to profitability is a critical new factor for some, notably Oscar Health, suggesting its technology-led model for managing medical costs may be reaching a sustainable inflection point.
- While the growth narratives are compelling, they are not without significant risk, including high dependency on cyclical capital expenditure, intense competition, and regulatory pressures specific to each industry.
- The core investment thesis rests on potential multiple re-rating; if these firms sustain their growth trajectory, their current valuations may appear modest in retrospect, offering an asymmetric risk-reward profile.
In a market often polarised between prohibitively expensive growth stocks and low-growth value traps, identifying companies that offer both rapid expansion and reasonable valuations is a formidable challenge. Yet, a select group of profitable firms has managed precisely this feat, reporting annualised revenue growth of over 40% for the past three years while maintaining price-to-sales (P/S) multiples below 7x. This cohort, featuring names like Super Micro Computer (SMCI), MercadoLibre (MELI), Oscar Health (OSCR), and Cadeler (CDLR), offers a compelling alternative for investors seeking growth without paying the stratospheric premiums that dominate market leaders.
A Rare Cohort in a Polarised Market
The standard trade-off in public markets is clear: investors pay a high premium for secular growth or accept modest valuations for mature, slower-moving businesses. Companies that defy this binary are rare because sustained, high-velocity growth typically requires heavy investment that suppresses profits and attracts a valuation to match. The firms that meet this specific screen have found a way to scale their top line aggressively while achieving profitability, yet for various reasons, have not seen their multiples expand into the territory of their high-flying peers. This could be due to sector-specific scepticism, perceived cyclicality, or simply a lack of broad market appreciation for their unique position. Scrutinising their operational models and market positioning is essential to determine if this valuation gap represents a genuine opportunity or a well-deserved discount.
Dissecting the Contenders
While grouped by a set of quantitative filters, these companies operate in fundamentally different industries, each with unique drivers and risks. Their financial profiles underscore the potent combination of growth and valuation that makes them noteworthy. An analysis of e.l.f. Beauty (ELF) also reveals the dynamic nature of these screens; while a recent strong performance has pushed its P/S ratio just above the 7x threshold, its underlying business characteristics merit its inclusion in this discussion.
| Company | Ticker | 3-Year Revenue CAGR (Annualised) | P/S Ratio (TTM) | Market Sector |
|---|---|---|---|---|
| Super Micro Computer | SMCI | ~67% | ~2.7x | AI & Server Infrastructure |
| Cadeler A/S | CDLR | ~65% | ~6.2x | Offshore Wind Installation |
| Oscar Health | OSCR | ~59% | ~1.0x | Health Insurance (Insurtech) |
| e.l.f. Beauty | ELF | ~50% | ~8.5x | Cosmetics |
| MercadoLibre | MELI | ~41% | ~5.6x | E-commerce & Fintech |
Data as of late 2024. P/S ratios are trailing twelve months (TTM). Revenue CAGR is approximate over the last three fiscal years.
Super Micro Computer: The AI Infrastructure Backbone
Super Micro’s blistering growth is directly tethered to the artificial intelligence boom. The company designs and builds high-performance servers and is a key partner for chipmakers like Nvidia, providing the critical rack-scale infrastructure needed to power data centres. Its valuation remains modest relative to its growth, likely because the market perceives it as a hardware supplier with potential margin pressure and significant customer concentration risk. However, its expertise in liquid cooling and custom configurations for complex AI workloads provides a moat that separates it from commodity server assemblers.
MercadoLibre: The Enduring LatAm Champion
As the dominant e-commerce and fintech ecosystem in Latin America, MercadoLibre’s growth is a secular story of digitisation in an emerging market. Its flywheel, where a thriving marketplace feeds a high-growth credit and payments business (Mercado Pago), creates powerful network effects. Despite its consistent execution and entrenched market position, its valuation is periodically tempered by macroeconomic volatility and currency fluctuations in its key markets, notably Brazil and Argentina. For investors with a tolerance for regional risk, MELI offers exposure to a long-term structural trend at a valuation that has not completely detached from its fundamentals.
Oscar Health: The Insurtech Turnaround Story
Perhaps the most compelling turnaround narrative in this group belongs to Oscar Health. After years of steep losses that led many to question the viability of the insurtech model, the company has recently achieved profitability. Its growth has been driven by expanding its presence on the Affordable Care Act marketplaces. The critical development is the improvement in its Medical Loss Ratio, suggesting its technology platform is finally creating efficiencies in managing member care and reducing costs. [1] Its low P/S ratio of approximately 1.0x reflects lingering market scepticism, but if its newfound profitability proves sustainable, a significant re-rating could occur.
Cadeler: A Niche Play on the Green Transition
Cadeler is a specialist operator of wind turbine installation vessels (WTIVs), placing it at the heart of the global transition to renewable energy. The demand for its services is propelled by a move towards larger and more powerful offshore turbines, which require next-generation vessels that are in short supply. This creates significant pricing power and high visibility, with a strong contract backlog extending for several years. The market may apply a discount due to its niche focus and the capital-intensive nature of its fleet, but it represents a shovel-and-pick investment on the durable trend of decarbonisation.
An Investor’s Calculus: The Asymmetric Bet
Investing in this cohort is not without considerable risk. High-growth business models are inherently fragile and sensitive to shifts in the macroeconomic landscape. A slowdown in AI capital expenditure would directly impact Super Micro, while a downturn in consumer discretionary spending could challenge e.l.f. Beauty’s momentum. Likewise, Oscar’s profitability remains nascent, and Cadeler is exposed to potential shifts in green energy policy.
However, the investment thesis is built on asymmetry. For these companies, the primary variable is not just continued operational execution but the market’s willingness to reward that execution with a higher multiple. If they can sustain their growth rates for another two to three years, their current P/S ratios will look exceptionally cheap in hindsight. The speculative hypothesis is this: among the group, MercadoLibre’s ecosystem-driven moat is the most durable and least susceptible to a single point of failure. While others are tied to specific capital cycles or regulatory environments, MELI’s growth is linked to the fundamental, multi-decade digitisation of an entire continent—a trend that is unlikely to reverse, even in the face of regional economic turbulence.
References
1. Yahoo Finance. (2024). *Why Oscar Health, Inc. (OSCR) is a ‘Buy’ Stock Now*. Retrieved from Yahoo Finance.
2. Statista. (2024). *Top companies in the world by market capitalization*. Retrieved from Statista.
3. Macrotrends. (2024). *MercadoLibre Revenue 2010-2024 | MELI*. Retrieved from Macrotrends.
4. The Motley Fool. (2024). *Thinking of Buying MercadoLibre Today? This Prediction Could Make You a Fortune*. Retrieved from The Motley Fool.
5. MMoney642. (2024, October). [Post listing profitable high-growth companies under 7x sales]. Retrieved from https://x.com/MMoney642/status/1932165951606178301
