Cathie Wood, a well-known growth stock investor who runs Ark Invest funds, has renewed her focus on companies that are not currently going through their best period on the stock market. Despite markets breaking records, shares of companies such as Pinterest, PayPal and GitLab are still well below their all-time highs.

However, Cathie Wood has not hesitated to add these three companies to its portfolio. What's driving her to do this? Let's take a closer look at each of them.

Pinterest.

Pinterest, Inc.

PINS

$32.48 -$0.24 -0.73%

Capital Structure

Market Cap

22.3B

Enterpr. Val.

21.1B

Valuation

P/E

112.0

P/S

6.7

Open $32.86

Day range $32.36 - $33.14

52 week range $23.59 - $45.18

Pinterest $PINS-0.7% is a visual search platform that experienced a surge in popularity during the pandemic, with people spending more time at home looking for inspiration for home projects or culinary ideas. However, this growth was followed by a lull as life gradually returned to normal. Pinterest, however, is now back in the limelight.

Pinterest's revenue growth has accelerated over the past six quarters, surpassing 20% in two quarters this year. The active user base grew 12% to reach a record 522 million accounts. Earnings per share even grew by 38%. On the other hand, however, management provided a disappointing outlook in its latest report. The expected revenue growth of between 16% and 18% is lower than what analysts were counting on.

However, Pinterest has already shown several times that it can surprise. For example, in the second quarter of this year, it expected only 15% growth, but ended up posting 21% growth. Average revenue per user is also increasing, which is an important indicator for the long-term monetization of the platform.

PayPal: Former fintech giant seeks lost luster

PayPal

PYPL

$77.88 -$2.20 -2.75%

Capital Structure

Market Cap

79.6B

Enterpr. Val.

84.9B

Valuation

P/E

18.9

P/S

2.6

Open $80.40

Day range $77.73 - $80.63

52 week range $50.25 - $80.63

PayPal $PYPL-2.7%, one of the best-known digital payments companies, has been losing its former position in recent years. In 2021, there was speculation that PayPal was planning to acquire Pinterest for $70 per share. However, that deal ultimately did not happen, which many shareholders consider a missed opportunity. Today, Pinterest shares are hovering around $30 and PayPal shares have fallen by more than two-thirds in the past three years.

Despite this, PayPal still has a lot to offer. The company generates more than $5 billion a year in free cash and its payment volume is growing, most recently by 11%. With 429 million active users, it is still a strong player in the market. Moreover, PayPal offers an attractive valuation, with shares trading at a multiple of earnings at "teen" values. Although other players are growing faster, PayPal still has a strong foothold in the market.

GitLab: a software innovator on the rise

GitLab Inc.

GTLB

$51.65 $0.24 +0.47%

Capital Structure

Market Cap

8.3B

Enterpr. Val.

7.8B

Valuation

P/E

-22.1

P/S

12.4

Open $51.72

Day range $50.85 - $51.82

52 week range $40.19 - $78.53

GitLab $GTLB+0.5%, a company specializing in a cloud-based platform for software development and deployment, is another of Cathie Wood's investments. Although its stock is trading closer to its yearly low than its high, GitLab regularly beats Wall Street expectations and reports revenue growth in excess of 30%.

The company recently reported results that beat forecasts, and its AI-powered software development platform has great potential. GitLab is currently trading at a high multiple of expected earnings, but the market is justifying this valuation with rapid growth and innovative products.

Disclaimer: There is a lot of inspiration to be found on Bulios, but stock selection and portfolio construction is up to you, so always do a thorough analysis of your own.

Source: The Motley Fool.