1 No-Brainer Growth Stock You Can Buy for Under $100 Right Now

Despite the recent market drawdown, many growth stocks still look overvalued at the moment. The S&P 500 price-to-earnings (P/E) ratio is 29, which is close to a record high compared to its long-term average. Many stocks such as Palantir trade at monumentally high price-to-sales (P/S) ratios. Just because these high flyers are down 20% does not mean they are a bargain for investors.

Not all growth stocks are trading at inflated prices, though. I believe Uber (NYSE: UBER) is a no-brainer stock for investors to buy, and it trades for less thanr $100. Here's why investors should consider adding Uber stock to their portfolios today.

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Extending lead vs. competitors

Uber is a ride-sharing and food-delivery platform. Most of its earnings come from ride sharing, and it is extending its lead over competitors like Lyft. In fact, you could argue there are barely any competitors left in ride sharing for Uber, especially in North America. This is giving the company a virtual monopoly on a fast-growing sector of the economy.

Last quarter, gross bookings on Uber's ride-sharing platform grew 24% year over year to $22.8 billion, with $6.9 billion of that converting to revenue for Uber. As the middleman between riders and drivers, Uber should be able to take a large chunk of this revenue home as profit. As the platform keeps scaling, there is a ton of potential for operating leverage in this business.

The delivery business is doing just fine as well. Although it has a larger competitor in DoorDash and is not nearly as profitable as ride sharing at the moment, the segment grew bookings 20% year over year last quarter to $20.1 billion.

Combined with the small freight business, Uber generated $44.2 billion in gross bookings on its platform just in last year's fourth quarter. With ride sharing and food delivery expected to keep growing for the rest of the decade, this bookings figure is poised to climb higher in years to come.

Risks and opportunities in self-driving cars

One wrench that is getting thrown in the mix is self-driving vehicle technology. Start-ups such as Waymo -- backed by technology giant Alphabet -- are rapidly expanding across the United States with an improved customer value proposition. Is this a threat to Uber's monopoly?

While Waymo is definitely a threat to watch, right now these new self-driving technologies seem to be benefiting Uber's business. Waymo is available to purchase on the Uber application in some markets in order to fill in gaps in demand.

Self-driving technology may help grow the entire ride-sharing pie, with Uber expecting autonomous vehicles to unlock a $1 trillion market just in the United States alone. If Uber is able to maintain its dominance as the ride-sharing application of choice for consumers, this step change in demand could help it see sustained bookings growth in the profitable North American market.

Uber gave up on its autonomous-driving ambitions a while ago. Its goal is to be the software layer connecting drivers and riders around the world, while leaving the expensive research, development, and technological costs to companies like Waymo. Time will tell, but this could be a smart move profit-wise for the company.

Why Uber is a great growth stock to buy

When first looking at Uber stock, it doesn't seem overly cheap. It trades at a market cap of $157 billion and generated $2.77 billion in operating income last year. This underrates Uber's potential earnings power, though.

For one, Uber's revenue should keep growing at a double-digit rate. Management is guiding for gross bookings to grow at a mid-teens annual clip through 2026. Second, management is guiding for consistent profit margin expansion as the business matures around the world.

Today, Uber has an operating margin of just 6%, and I believe this number can grow to 20% or higher over the long term due to the asset-light nature of its operations.

Uber's revenue was $44 billion in 2024. Assuming it grows at a 15% annual rate for three years, that number will reach $67 billion. A 20% operating margin on $67 billion in revenue is $13.4 billion in operating income, which is around 5 times today's level and just over 10 times its current market cap. I think a monopoly-like business deserves to trade at much higher than 10 times earnings, meaning Uber stock is a good growth stock to buy at current levels.

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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends DoorDash, Palantir Technologies, and Uber Technologies. The Motley Fool has a disclosure policy.