Growth stocks have surged in the past year as investors piled into high-potential players like artificial intelligence (AI) companies. In fact, these stocks led S&P 500(SNPINDEX: ^GSPC)of Nasdaq Composite(NASDAQINDEX: ^IXIC)And Dow Jones Industrial Average(DJINDICES: ^DJI) They each forecast double-digit gains for 2024 — up 23%, 28% and 12%, respectively. Since we’re in a bull market, this isn’t too surprising: bull markets are generally good for growth-oriented companies, because the environment allows them to expand.
That doesn’t mean every growth stock has gone up. Some quality players are left behind. And the good news is that this gives you an opportunity now to get into high growth stocks at very affordable prices. In consumer goods, two come to mind.
Let’s take a look at these players who have lost 20% or more in the past year and make great buys today.
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Etsy(NASDAQ: ETSY ) It connects sellers of handmade and vintage goods with buyers through an e-commerce platform. The company consistently grows revenue and is profitable. But earnings have suffered over the past two years as a high interest rate environment and economic worries weighed on consumers’ wallets. Because Etsy sells items that are in demand, when consumers control their spending, Etsy can suffer.
Still, two things make Etsy stand out as a solid long-term winner and investment. One of these is AC’s capital-light business model, which means the company does not need to make major capital investments to grow.
For example, Etsy doesn’t need to build warehouses or organize package deliveries — sellers who pay Etsy to use the platform take care of all of that for Etsy shops. As a result, Etsy can turn over most of its adjusted earnings before interest, taxes, depreciation and amortization (The events) — about 90% in the last quarter — into Free cash flow.
Another reason to love Etsy is that the company both keeps buyers coming back and attracts new buyers. Although the company saw a 0.4% decline in sales to about 91 million in the most recent quarter, overall its customers remained loyal. Etsy’s retention of active buyers and addition of new buyers each quarter remains above pre-pandemic levels. As the economic background improves, these trends may strengthen, and should lead to growth on the way.
With these two points in mind, Etsy, trading at just 10x forward earnings estimates, down from more than 16x early last year, now looks like an absolute steal — making it a top consumer-focused stock to buy and hold.
Fans of comfortable and beautiful shoes and other athletic equipment flock there Lululemon Athletics(NASDAQ: LULU). Its focus on the quality of its products has allowed it to become a leader in the premium market, enabling the company to achieve excellence and build an impressive record of profitability.
In recent years, the company’s revenue and net income have risen to billions of dollars, and trailing 12 months of free cash flow has reached more than $1.5 billion. Lululemon has been able to reach a record high of over 57% quarter after quarter over the past two years, supporting high profitability.
Growth has been slow in the Americas, where the company generates the lion’s share of revenue, but global revenue and global comparable sales posted double-digit growth in the most recent quarter. So Lululemon’s earlier plan to grow its international business is working — and the company is now focusing on growing its U.S. sales.
And Lululemon’s latest news gives us reason to be optimistic. The company reported a successful holiday season, allowing it to raise fourth-quarter 2024 revenue, earnings per share and gross margin guidance. The new forecast shows revenue growth of 11 to 12 percent per year.
Lululemon’s move on this shows its confidence in the future. The company bought back 1.6 million shares in the third quarter, and earlier last month, the board approved a $1 billion increase in the stock buyback program.
Speaking of stock buys, at today’s valuation, trading for 27x forward earnings estimates compared to 40x a year ago, Lululemon stock looks like it’s on sale right now.
Before you buy stock on Etsy, consider this:
of Motley Fool Stock Advisor An analytical team identified the believers. 10 best stocks For investors to buy now… and Etsy was not one of them. 10 stocks that made the cut could make monster returns in the coming years.
Think about when Nivea This listing was made on April 15, 2005… If you invested $1,000 at the time we posted it, You will have $807,495!*
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Adrian Cimino It has no place in the said shares. Motley Fool has spots and recommends Etsy and Lululemon Athletica. The Motley Fool has Disclosure Policy.
