2 Growth Stocks Wall Street Might Be Sleeping on, But I'm Not

Key Points

• Roku's revenue growth outpaces that of Tesla and Apple, yet it trades at a fraction of their valuations.

• Dutch Bros plans to grow from 1,000 locations today to over 2,000 by 2029, with long-term potential for 7,000 stores.

• Both companies are executing ambitious growth strategies while Wall Street shows various types of skepticism about their prospects.

• 10 stocks we like better than Roku ›

Many growth stocks are already market darlings. Their explosive business success is nobody's secret, so they trade at sky-high valuation ratios. It can make sense to buy into these skyrocketing growth stories, but it's much better to find tomorrow's giants before Wall Street catches on.

On that note, I'd like to show you a couple of exciting growth stocks that aren't getting the investor love they deserve. One is a classic, undervalued success story; the other sports a rich valuation but also a lot of short-seller interest. I've had my eye on these stocks for a long time. Here's what you need to know about Dutch Bros (NYSE: BROS) and Roku (NASDAQ: ROKU).

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Roku keeps growing, but investors are looking away

Media-streaming technology veteran Roku is the overlooked winner here. Roku's sales growth is nearly unstoppable. It did take a break in the inflation crisis of 2022, but it quickly got back on track. Over the last two years, Roku's year-over-year growth has averaged 14.7%.

That's faster than Tesla (NASDAQ: TSLA) at 11.8% and ahead of Apple's (NASDAQ: AAPL) 6.7%. This little innovator can run with the big dogs.

Now, Roku's stock has gained a market-beating 45% over the last year. The chronically undervalued shares are starting to gain some respect at long last. But Roku's stock is trading at just 3.1 times sales, putting it in Wall Street's bargain bin. By contrast, the slower-growing Apple and Tesla stocks are valued at 8.0 and 11.0 times sales, respectively.

And the company stands at an important inflection point right now. Roku is exploring international growth more seriously while rolling out better advertising tools and making promising acquisitions in the streaming services market.

I can't wait to see Roku regain the stock market's respect as these separate growth catalysts take effect. Roku has been one of my favorite stocks to buy in recent years. It still is, but the buying window may close pretty soon.

Dutch Bros brings the buzz -- and short-seller fuzz

Drive-thru coffee vendor Dutch Bros is a different story. This stock is getting plenty of investor love, with a price-to-sales ratio just north of 7.1 and a triple-digit price-to-earnings ratio. The stock has gained 52% over the last year, outperforming all the other stocks I've mentioned in this analysis.

But the stock also comes with the highest short-selling ratio in this group. With 6.8% of Dutch Bros' shares on loan to bearish investors who expect it to move down, Dutch Bros would be in the top 10% of S&P 500 (SNPINDEX: ^GSPC) short ratios if it were a member of that exclusive group.

And the stock isn't exactly skyrocketing. Dutch Bros' share price has fallen 32% since February, when a modest list of guidance targets outweighed strong revenue and earnings surprises.

Image source: Getty Images.

Yes, the stock is expensive in many ways. But smart investors can capitalize on Dutch Bros' volatile nature by building a position on price dips -- like the multi-month swoon you see right now.

Meanwhile, the company is expanding from its West Coast hub to open locations in every state. For example, they just poured the foundation for a future Dutch Bros next to my kids' high school in the Tampa suburbs. In a few months, I'll get to experience the company's friendly service and exclusive drive-thru focus for myself. And wherever you live, Dutch Bros probably has plans for a store somewhere near your neighborhood, too.

With roughly 1,000 locations in operation so far, Dutch Bros is aiming for a cheeky 2,029 store count by the year 2029 and as many as 7,000 in the long run. These are still early days in this company's ambitious expansion project, which is why I don't mind paying a premium for its extreme growth prospects.

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Anders Bylund has positions in Roku. The Motley Fool has positions in and recommends Apple, Roku, and Tesla. The Motley Fool recommends Dutch Bros. The Motley Fool has a disclosure policy.