Growth stocks have a lot of upside potential — that’s why they’re called growth stocks. But reality is often trickier than theory. Even if a company is growing quickly, you might pay too much for this growth, meaning your returns will be sub-optimal. The best time to buy a growth stock is when most investors aren’t fully appreciating the growth ahead. This way, you can buy into high growth rates at a discounted valuation.
And right now, one of my favorite businesses is ready for massive sales growth despite a paltry valuation. If you’re looking for cheap growth stocks that can add a lot of juice to your portfolio, check out the electric car stock below.
This is my favorite growth stock right now
When it comes to growth, most investors are ignoring Rivian Automotive (RIVN -4.70%) at the moment. And they’re not completely wrong for doing so. Last quarter, Rivian actually saw its sales base decrease. A slowdown in sales growth has suppressed Rivian’s valuation, and shares now trade at just 3 times sales — a deep discount to their former levels. But there’s more to this story than revenue growth alone lets on. And if you dig into the numbers, you’ll find that Rivian is about to turn into a growth machine.
Very often, stock market analysts can become too myopic on near-term results. Legendary investors like Warren Buffett are famous for their long-term approach, which allows them to take advantage of short-term mispricings simply through the power of patience. This year, analysts expect Rivian to grow sales by just 11%. That’s better than a sales drop, but still hardly “growth stock” territory.
Yet, here’s the thing. Starting in 2026, I believe Rivian’s sales growth will begin to skyrocket due to the launch of several affordable mass market vehicles like the R2. When Tesla launched its affordable models — the Model 3 and Model Y — sales doubled, and then tripled in the years that followed.
What’s the catch here? The issue is that Rivian is currently stuck in a difficult spot. EV sales growth industrywide was lackluster in 2024. And with only two luxury models costing as much as $100,000 each, Rivian had limited ways to compete, hence its sales drop last year. But long term, EV sales growth is expected to rebound, sustaining positive growth rates for another decade or more. And by late 2026, Rivian’s management team expects to launch three new mass market vehicles, all of which will cost less than $50,000.
In summary, Rivian should be a very different company in 2026 and 2027. It will have more than doubled its lineup, with most of its models targeting the mass market. That’s a huge inflection point for sales growth, considering millions more people will then be able to afford its products. If sales growth does indeed accelerate strongly in 2026 and 2027, the current valuation is almost certainly a steal. But there’s one thing you should be looking out for in the meantime.
RIVN Revenue (TTM) data by YCharts
1 Strategy you must use with Rivian stock
The thesis here is that Rivian shares are underpriced due to the market over-focusing on short-term results rather than multi-year projections. This allows patient investors to take advantage of the mispricing, locking in an attractive valuation today while waiting for growth to accelerate in future years. But that’s the catch: You must remain patient. Rivian is still a money-losing business. And while it has successfully brought several luxury models to market, it’s an entirely different challenge to bring three new mass market vehicles to market on time and on budget.
There will be plenty of bumps along the road for Rivian. The key here will be to maintain a long-term perspective. If you’re capable of holding tight through 2027, and are even willing to double down should shares show weakness along the way, Rivian looks like a fantastic combination of growth and value.
Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
