3 Fantastic Growth Stocks to Buy in August

The recent sell-off in the stock market appears to have petered out, and now could be a great time for long-term investors to put some of their cash to work.

Three Motley Fool contributors think they’ve found fantastic growth stocks to buy in August. Here’s why they chose Eli Lilly (LLY -1.01%), Novo Nordisk (NGO -1.58%)and Vertex Pharmaceuticals (VRTX 1.14%).

A giant that could double in size

David Jagielski (Eli Lilly): Growth investors might be tempted to look for small-cap stocks in hopes of maximizing long-term returns, but one of the best growth stocks in health care is also the biggest: Eli Lilly. At a market cap of about $800 billion, it’s likely only a matter of time before it becomes the first healthcare stock to reach a $1 trillion valuation. I think the stock could go much higher than that, potentially doubling over the next five years.

Lilly’s latest quarterly results highlighted why this is a fantastic growth stock to buy. It’s been just over two years since the US Food and Drug Administration (FDA) approved the diabetes drug Mounjaro. Drug sales topped $3.1 billion in Lilly’s most recent quarter, which ended June 30. Regulators approved Zepbound (which contains the same active ingredient as Mounjaro) for weight loss last November. It’s sure to be another huge drug for Eli Lilly, which already had $1.2 billion in revenue last quarter.

The only thing stopping Eli Lilly these days is its limited capacity. There is simply too much demand for the company’s diabetes and weight loss drugs. Lilly is working feverishly to expand capacity so it can sell more of these highly coveted products. Investors also shouldn’t overlook the company’s recently approved early Alzheimer’s treatment, Kisunla, which is likely to be another blockbuster drug.

Eli Lilly is not only a safe healthcare stock to invest in, it’s a growing beast with plenty of long-term potential, and the business will become much more valuable in the coming years.

A pharmaceutical giant that defies gravity

Prosper Junior Bakiny (Novo Nordisk): Investors looking for firing on all cylinders need look no further than Novo Nordisk. This leading drugmaker has soared over the past five years, delivering strong financial results, making steady clinical progress and outperforming most of its peers of similar size.

Novo Nordisk probably won’t slow down significantly anytime soon. The company’s two main growth drivers, weight loss drug Wegovy and diabetes therapy Ozempic, are still going strong. These have become famous brands, a feat more common in the tech industry than in the pharmaceutical industry. And while Novo Nordisk’s success is attracting dozens of competitors, the company is likely to remain near the top of the fast-growing anti-obesity market.

Novo Nordisk boasts some very promising candidates in this field. Perhaps one concern some investors have is that Eli Lilly is relying too heavily on its diabetes and obesity portfolio. People probably cannot name drugs in other areas that contribute significantly to its peak growth. That’s because it doesn’t exist. However, Novo Nordisk is looking to diversify its range. Its pipeline contains potential drugs for Parkinson’s, hemophilia, sickle cell disease, thalassemia and other conditions.

Even if other companies eat away at some of its market share in its core areas, Novo Nordisk should successfully launch at least a few blockbusters elsewhere to compensate. Don’t underestimate the innovative potential of the drugmaker. It is largely responsible for its current success and will continue to drive the stock higher in the long term. Novo Nordisk is a great stock to buy this month, or any month for that matter.

Growth, growth and more growth

Keith Speights (Vertex Pharmaceuticals): Growth has not been a problem for Vertex Pharmaceuticals in recent years. The company enjoys a monopoly in treating the underlying cause of the rare genetic disease cystic fibrosis (CF). Its CF sales could accelerate if Vertex’s vanzacaftor triple-drug combination receives FDA approval, which could be launched by early 2025.

Vertex is poised to drive additional growth outside of CF. The launch of Casgevy as a unique treatment for the rare blood diseases sickle cell disease and transfusion-dependent beta-thalassemia is still growing. Casgevy is the first CRISPR gene-editing therapy to receive FDA approval.

More growth (and I would go so far as to say much more growth) could be coming soon. Vertex is awaiting FDA approval for suzetrigine for acute pain relief. As a non-opioid, I believe the drug should have tremendous commercial potential.

Vertex is evaluating inaxaplin in a late-stage clinical trial targeting APOL1-mediated kidney disease (AMKD). There are currently no approved therapies to treat the underlying cause of AMKD. The company’s recent acquisition of Alpine added povetacicept to its pipeline. The investigational drug is another late-stage candidate targeting kidney disorders.

Perhaps best of all, Vertex’s valuation doesn’t reflect its tremendous growth prospects. The stock’s price-to-earnings-to-growth (PEG) ratio is 0.67. Any stock with a PEG ratio below 1.0 is considered to be attractively valued.