3 Growth Stocks That Could Double

By George Budwell, Neha Chamaria, and Steve Symington Markets Fool.com

Stocks that can double within a year or two aren't exactly common. Even so, our contributors think that the biotech Agenus (NASDAQ: AGEN), industrial distributorHD Supply Holdings (NASDAQ: HDS), and sportswear manufacturerUnder Armour (NYSE: UA) have decent shots at doing just that. Read on to find out why.

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Take a cue from the Street on this deeply undervalued biotech

George Budwell(Agenus): Agenus is an under-the-radar cancer company that's developing several checkpoint inhibitors/modulators across a variety of tumor types. Although the company is woefully behind the leaders in the field and faces immense competition from almost every big pharma, the market is acting like Agenus will be almost completely shut out of this multi-billion dollar market.

Image Source: Getty Images

Agenus has something along the lines of 10 or so checkpoint inhibitors in preclinical studies or clinical trials at the moment (the company has multiple undisclosed candidates, making it hard to come up with an exact number). The really interesting part is that these types of drugs have proven to be extremely effective anti-cancer agents in the clinic, with most experimental candidates actually hitting the mark in pivotal-stage trials.

The point is that Agenus' early stage pipeline is actually far less risky than most investors may understand. So while Agenus probably won't develop a first-in-class product that'll gobble up the lion's share of the market, it does appear to have a better than average shot at getting at least one -- or perhaps multiple -- drugs through the risky clinical trials process.

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My optimistic assessment of the company's checkpoint inhibitor pipeline, though, stands in stark contrast to the market's overtly dire view.

The bottom line is that the market appears to be assigning Agenus' entire checkpoint inhibitor pipeline at a risk-adjusted value of around $60 million right now (based on a back of the envelope discounted cash flow analysis). Even on a risk-adjusted basis and assuming these drugs do wind up in the dreaded "me-too" category if approved, that's arguably a highly questionable valuation. After all, the checkpoint inhibitor market is expected to be worth upwards of $20 billion by as early as 2021, and grow at a CAGR in excess of 13% over the next decade.

That's why I think the Street's 12-month average price target of $7.95 is indeed justified -- even though it does imply that this stock could nearly double from current levels.

This overlooked stock looks too good to pass up

Neha Chamaria (HD Supply Holdings): A growth stock is typically one that's expected to grow its earnings at a higher clip than the industry average, backed by strong growth potential and cash flows that are reinvested into the business instead of being paid out as dividends.Industrial distributorHD Supplyrecently caught my attention when I realized how the stock hasn't quite caught up with the rapid growth in the company's earnings or the growth potential under Donald Trump's presidency.

First things first -- check out the rising trendline of HD Supply's net profits and cash flows in the past five years.

HDS Net Income (TTM) data by YCharts

This rapid growthcan largely be attributed toHD Supply'sbusiness mix, where it gets a little more than one third of its sales from maintenance, repair, and operations products and services, the demand for which is relatively resilient. The remainder of the company's sales come from hardware products that primarily serve water, construction, and infrastructure industries.

Going forward, analystsproject HD Supply's EPS to grow almost 50% this year and about 27% over the next five years as management focuses on investments in new products and supply chain while divesting non-core assets to deleverage and fortify its balance sheet. Meanwhile, leading industry indicators are already pointing at a recovery in non-residential construction spending; and as HD Supply operates mainly in North America, any move by Trump's administration to kick-start infrastructure spending bodes well for the company. A cut in corporate tax rates would be another boon.

For a company with such strong growth prospects, the stock's trailing P/E of under eight and a five-year projected PEG ratio of only 0.6 make for a compelling bargain. If not exactly double, these valuations indicate strong upside potential in HD Supply shares going forward.

Down but not out

Steve Symington (Under Armour C Shares):There's no denying Under Armour's fourth-quarter 2016 results were disappointing. Revenue climbed "just" 11.7% year over year, to $1.308 billion, well below guidance and breaking a 26-quarter streak of achieving at least 20% top-line growth. According to Under Armour management, slower retail traffic in North America caused significant promotional activities early in the quarter, which effectively commoditized some of the company's basic core product that had previously sold through in past years. Under Armour also saw higher demand for more "lifestyle silhouettes," which caused an imbalance in its product assortment. As a result, North American revenue grew just 5.9% year over year, to $1.075 billion, representing 83.5% of total sales.

Even so, Under Armour is tackling the problem head on, and will strive for better differentiation among its core products, and to better accelerate its lifestyle product offerings to capture that broader demand. For a relatively young, fast-growing business like Under Armour, these sorts of growing pains are inevitable as the company worksto better align its 2017 product assortments with consumers' wants and needs, especially in today's difficult retail environment.

Meanwhile, there were bright spots in the quarter. Under Armour's footwear revenue grew 36% year over year, to $228 million, and enjoyed accelerated growth rates in both the running and basketball categories. And international segment revenue jumped 55.2% (60% at constant currency), to $215.3 million, with particular strength in the U.K., Germany, China, and Australia.

As it stands, Under Armour stock sits more than 55% below its 52-week high. But as Under Armour continues to foster these high-growth areas while working through its near-term challenges in North America, I think patient, long-term investors who take advantage of its recent post-earnings plunge will be more than happy with the end result.

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The author(s) may have a position in any stocks mentioned.

George Budwell has no position in any stocks mentioned. Neha Chamaria has no position in any stocks mentioned. Steve Symington owns shares of Under Armour (C Shares). The Motley Fool owns shares of and recommends Under Armour (C Shares). The Motley Fool has a disclosure policy.