The summer of 2025 has produced a split-screen market. At the top, a narrow group of AI-tilted mega-caps continues to pull the S&P 500 toward record territory, with breadth still thin under the surface. The index has logged multiple record closes this year, while the top-10 constituents sit near their highest share of index weight on record, showing how much leadership is concentrated at the summit. Meanwhile, the equal-weight S&P has risen far less, capturing the weaker participation beneath the headline gains.
Under that surface, valuation gaps are largest where investors have paid the least attention. U.S. small caps trade at steep discounts to large caps on forward multiples, ranging from about 25 to 30 percent in recent manager and index work, and as wide as 40 percent in Research Affiliates’ end-2024 calculation, which still places the spread at extreme historical levels. Historically, the cheapest quintile of small-cap stocks has delivered roughly 12.4 percent annualized returns, edging toward 13.9 percent when screened for quality and momentum. Research Affiliates also notes the gap persists even versus equal-weight large-cap indexes, pointing to concentration rather than a universal collapse in small-cap fundamentals.
Healthcare is a second pocket where growth and cheapness intersect. Year-to-date, the S&P 500 healthcare sector is down roughly 5 percent versus a gain of about 7 percent for the broader index. Forward P/E multiples near 16 times put sector valuations around three-decade lows and meaningfully below the S&P 500’s average. Policy overhangs, including renewed U.S. scrutiny of drug pricing and related cost pressures, have weighed on sentiment, yet analysts’ profit forecasts for the group still point to high-single- to low-double-digit growth over the next two years.
Even within technology, outside the headline AI leaders, there are names growing briskly without premium-of-the-moment pricing. Uber’s latest quarter showed revenue up 18 percent year over year, alongside strong cash generation, while the company expands autonomous ride-hailing through partnerships that are now live in Austin and rolling out in Atlanta. Uber’s enterprise-value-to-sales ratio sits near 4 times on trailing figures, which is low by big-tech standards and closer to mature consumer platforms than to high-multiple software peers.
Macro conditions amplify the dispersion. The Fed’s June Summary of Economic Projections pegs 2025 real GDP growth at a 1.4 percent median, with PCE inflation at 3.0 percent and core PCE at 3.1 percent, implying a slow-growth, still-sticky-inflation backdrop.
On top of that, shifting U.S. trade policy and tariff headlines have injected recurring uncertainty into risk premia, with markets repeatedly reacting to tariff announcements, carve-outs and negotiation volleys. In this setup, “cheap growth” isn’t shorthand for low P/E alone; it’s where credible earnings expansion meets valuations suppressed by macro-driven capital concentration.
The evidence is visible in the gaps above: record-era index concentration, unusually wide small-cap discounts with supportive long-run return history, sector-level dislocations like healthcare, and selectively mispriced operators in tech whose growth is grounded in delivered results rather than distant promises.
Methodology
We used stock screeners to pick stocks with a forward P/E ratio of less than 20 and an expected EPS growth rate of more than 20%. We also checked if these stocks have year-over-year EPS growth rate of at least 20%, to make sure each stock has a valid track record for delivering earnings growth. Additionally, we made sure these stocks have an upside potential of at least 25%, as of August 7. We have also mentioned the hedge fund sentiment around each stock as of Q1 2025.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10. Barrick Mining Corporation (NYSE:B)
Forward P/E Ratio: 11.61
EPS Growth YoY: 61%
Forward EPS Growth: 44%
Price Target Upside: 26%
Barrick Mining Corporation (NYSE:B) is one of the best cheap growth stocks to buy according to analysts. On July 23, 2025, reports emerged that China’s Zijin Mining is in advanced talks to acquire Barrick’s Tongon gold mine in Ivory Coast for up to $500 million. The deal, still subject to regulatory approval, comes as Barrick continues to streamline its portfolio by shedding lower-margin, shorter-life assets. Tongon, which began production in 2010, has seen its reserves decline in recent years and is projected to cease operations by 2027 without major reinvestment. Selling the mine would free up capital for Barrick to pursue higher-return opportunities, particularly in copper and long-life gold projects.
The potential sale reflects Barrick’s broader strategy of focusing on assets with strong margins and long production horizons. Management has signaled increased emphasis on copper, which now accounts for roughly one-fifth of the company’s output, with a target of raising that share to 30 percent by 2029. Divesting from smaller, aging mines like Tongon aligns with this shift, enabling Barrick to redeploy resources toward growth-oriented ventures in regions such as Latin America, North America, and Central Asia.
Barrick Mining Corporation (NYSE:B) is a global leader in gold and copper production, with operations spanning North and South America, Africa, the Middle East, and Asia. Founded in 1983, the company is headquartered in Toronto, Canada.
9. Targa Resources Corp. (NYSE:TRGP)
Forward P/E Ratio: 19.23
EPS Growth YoY: 54%
Forward EPS Growth: 37%
Price Target Upside: 25.67%
Targa Resources Corp. (NYSE: TRGP) is one of the best cheap growth stocks to buy according to analysts. On August 8, 2025, Wells Fargo analyst Michael Blum reiterated an Overweight rating on Targa Resources and raised the firm’s price target from $198 to $205. The rating was maintained following the company’s second-quarter performance, which Wells Fargo considered to be in line with expectations.
The updated price target reflected continued confidence in Targa’s 2025 guidance as well as anticipated volume growth in the Permian Basin. While these forward-looking assessments were not directly quoted from the analyst, they align with broader interpretations of the firm’s outlook. The reaffirmation suggests that Targa remains well positioned within the midstream space despite sector-wide volatility.
Targa Resources Corp. (NYSE: TRGP), headquartered in Houston, Texas, is a leading provider of midstream natural gas and natural gas liquids services. The company operates a vast network of pipelines, processing plants, and storage facilities, primarily focused on the Permian Basin and other key shale regions in the United States.
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