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3 growth stocks that are cheap now

These stocks represent three growth stories that investors can follow and possibly start a position in as the businesses advance. They are majors in their industries, and can finance the investment needed to be successful. It’s hard to predict exact future returns, yet when earnings rise, share prices follow.

Santos Limited (ASX:STO) is moving forward with its oil and gas development in the Cooper Basin. It works with such energy producers as Beach Energy Limited (ASX:BPT), Senex Energy (ASX:SXY) and Drillsearch Energy Limited (ASX:DLS) to develop and produce unconventional gas.

The LNG export industry will need large amounts of gas to meet overseas demand once it starts shipping next year. The company’s existing infrastructure can manage the gas, and send it on to QLD to supply that need. Gas prices may rise substantially over the next few years, potentially adding more revenue.

Macquarie Group Ltd (ASX:MQG) is positioning itself in the residential home loan market to take advantage of the rising housing market. The Big Four banks have the lion’s share of that market. However, the investment bank is working with companies like Yellow Brick Road Holdings Ltd (ASX:YBR), a wealth management service provider, to access its branch network to supply more loans.

It has interests in companies like mortgage aggregator Vow Financial. This can get its loan products in front of more customers, and in the future it could consolidate its position to boost its home loan market share.

If the housing market is only beginning to rise, and has a number of years to run, then there could be good earnings growth for the investment bank.

Fortescue Metals Group Ltd (ASX:FMG) has done a great job in expanding production and bringing down costs. It stated it will hit its target capacity of 155 million tonnes per annum in March this year, and it is expanding its port facilities at Port Hedland.

Recent concerns over weaker iron ore prices have put some investors off, since China may be slowing down. The company is looking past that, seeing the long-term demand China and other developing countries will have for iron ore as they urbanise.

Foolish takeaway

If a stock doesn’t have much growth in store, it can stay cheap for a long time. Earnings growth drives share prices, so today’s prices may seem relatively cheap when compared to the growth opportunities they offer.

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