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The S&P 500 Is Down 22% — It's Time to Buy These 3 Ultra-Growth Stocks

If you're looking for stock bargains, there are plenty to be found right now. The S&P 500 (SNPINDEX: ^GSPC) is trading roughly 19% below its early January high, which means roughly half of the index's constituents are down by even more. Most of the names leading the charge lower are the growth names that led the bullish charge in 2021. And it's among these stocks that you'll find the very best names to nibble on at their lows.

Here's a rundown of three ultra-growth stocks it's time for true long-termers to go ahead and add to their portfolios.

1. Paycom Software

It's an unfamiliar name to most investors. Don't let the lack of notoriety fool you, however -- Paycom Software (NYSE: PAYC) is a growth machine with plenty of room to continue its expansion. This year's projected top-line improvement of 26.4% and next year's anticipated sales growth of 23.2% are pretty typical, while earnings are growing at an even faster clip. There's no reason to think the future's going to look much different.

Paycom helps companies handle payroll processing more efficiently. It also offers related services such as scheduling, recruiting, and employee benefits, but making it easy to hand out paychecks is at the heart of what it does. It's not particularly complicated software for computer coders to design and deliver. Its customers love it all the same, though, because running a human resources department can be a complicated affair. This all-in-one software de-complicates it.

The stock's halving since November's high suggests shareholders are worried that an economic slowdown could stunt Paycom's growth by slowing hiring. And maybe it will ... a little. The scope of the sell-off is arguably overblown, though. Paycom's top and bottom lines have been steadily growing for years now regardless of the economy's condition at the time; its offerings just make payroll and other HR functions too easy to not utilize.

PAYC Revenue (Quarterly) data by YCharts

Besides, with the United States' unemployment rate still near a record low of 3.6% and job openings still near a record high of 11.4 million (according to numbers from the Bureau of Labor Statistics), we've yet to see any real evidence that any recessionary headwind is actually taking a toll on the job market.

2. DexCom

DexCom (NASDAQ: DXCM) makes medical devices. Namely, it makes continuous glucose monitors for diabetes patients. Its most recent model is the G6, which not only handles the task of monitoring glucose levels, but can be managed with a smartphone and integrated with third-party insulin pumps. It can truly serve as a turnkey diabetes-management solution.

And the need for such tech has never been greater.

Thanks to a combination of increasingly poor diets and the subsequent worldwide obesity rise -- in addition to more testing and awareness -- diabetes has become much more common. The International Diabetes Federation estimates 9.3% of the planet's population was diabetic as of 2019, and it says that 10.9% of its still-growing population could have the disease by 2045.

Putting that into raw numbers, the number of people diagnosed with some form of diabetes could swell from a little more than 700 million to nearly 1 billion within the next couple of decades, based on population-growth projections provided by Worldometer. Not all of them will require glucose monitors, but many will, and it's possible that a good chunk of this market should be using glucose monitors right now, but aren't.

That's what current growth projections for DexCom imply, anyway. Analysts are calling for sales growth of 19.3% this year, followed by 20.2% growth in 2023. And like Paycom, earnings are growing even faster than revenue.

3. Nvidia

Finally, add Nvidia (NASDAQ: NVDA) to your list of ultra-growth stocks to buy now while the market's more than a bit depressed. Nvidia has helped lead that charge lower. It's now down more than 40% since March, and more than 53% below its November high.

You probably know the company as a maker of high-performance graphics cards preferred by hardcore video gamers. This will continue to be an important part of its business. As it turns out, however, the same underlying technology used in graphics cards is also perfectly suited to handle massive data loads now being handled by corporate data centers.

And it's particularly well-suited for the development of artificial intelligence (AI) applications. The company is now building and designing processors from the ground up to specifically handle the needs of AI developers. To this end, data center revenue eclipsed Nvidia's video gaming revenue last quarter, with artificial intelligence usage driving the data center arm's quarterly top line up 83% year over year.

This growth to date, however, still only scratches the surface of the company's potential. International Data Corp. says spending on AI solutions will likely grow to the tune of 19.6% this year, and hold steady slightly above that pace through 2025.

Analysts expect Nvidia to capture at least its fair share of that growth, modeling a top-line improvement of 25.3% for the current fiscal year. These same analysts expect the company's growth pace to cool to a more tempered 16.7%, perhaps reflecting a slowdown from Nvidia's other product categories besides data centers. Even so, this well-known computer-tech name's developed a penchant for topping estimates.

Find out why Paycom Software is one of the 10 best stocks to buy now

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*Stock Advisor returns as of June 2, 2022

James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Paycom Software. The Motley Fool recommends DexCom. The Motley Fool has a disclosure policy.


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