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We've had a market decline recently and some high-quality stocks look more attractive than they did a few weeks ago. Without further ado, here are my top two growth stocks that I will consider buying in 2025.
<h2 class="wp-block-heading" id="h-ashtead-technology“>Ashtead technology
First is Ashtead technology (LSE: EN.). It is an AIM-listed subsea equipment rental company serving both the marine renewable energy and oil and gas sectors.
The stock is up more than 200% since its listing in late 2021. However, it is down around 41% in the last five months, which I think offers a potentially attractive entry point.
The drop came after the company's first half report in September. Revenue rose 61.4% year-on-year to £80.5m, and adjusted earnings per share (EPS) rose 36% to 19.1p. Solid stuff.
However, adjusted EBITDA margin contracted from 42.4% to 39%, while the company's capital expenditure (capex) doubled to £16.4 million. Capital spending is expected to rise to £30m over the full year.
There is a risk that Ashtead technology's profitability could suffer in the short term as it invests in acquisitions, additional sales teams and new rental equipment. Potentially bad acquisitions also add risk.
However, as a shareholder, I am happy that the company is investing in future growth opportunities. And these look plentiful, with its total addressable market forecast to reach $3.5 billion by 2027, with offshore wind growing at 23% annually.
In summary, Ashtead technology is a small but profitable £415 million company that is well positioned to capitalize on strong demand for both renewables and oil and gas. Given that the stock is trading at just 11.3 times next year's forecast earnings, I think it's worth considering.
MercadoLibre
In contrast, MercadoLibre (NASDAQ: MELI) is no minnow. Founded in 1999, it is now an $87 billion giant that runs the largest e-commerce marketplace in 18 Latin American countries. It also has a fintech platform and a leading logistics operation.
The company is often referred to as the 'amazon/PayPal of Latin America'. It has benefited greatly from rising income levels and smartphone penetration rates across the region.
However, in the last two months, the share price has fallen around 20% due to concerns about its push into consumer credit (it has applied for a banking license in Mexico). The risk is that expanding your credit card business opens up the risk of bad loans and this could affect profitability.
That's the glass half full view. Personally, however, I think this huge opportunity is worth taking advantage of, since around 70% of Latin America's population is still unbanked or underbanked, according to the World Bank.
Between 2013 and 2023, MercadoLibre grew its revenue at a compound annual growth rate (CAGR) of 41% in US dollar terms! Obviously, growth won't continue at that pace forever, but the company believes its best days are yet to come.
If we look at the numbers, that may well be true. This is because while the company serves 87 million active buyers, Latin America's population is expected to reach 700 million by 2030.
Additionally, this population is young and internet-savvy, which is a fantastic context for a leading e-commerce and digital payments company.
Analysts expect net income to grow at a CAGR of around 48% between 2023 and 2026. That puts the stock at a very reasonable 28x earnings by 2026.
