One of the best ways to build lasting wealth is to invest in growing companies and hold onto those stocks for many years. While it’s difficult to know how a stock will perform in a given year, the odds of finding a timely buy can be increased by identifying companies that have good long-term prospects and are also showing improved financial results in the short term. may increase.
Three Motley Fool contributors were recently asked to select three stocks they believe have the potential to outperform the major indexes this year.Here’s why they chose elf beauty (NYSE:ELF), revolve group (New York Stock Exchange: RVLV)and sweet green (New York Stock Exchange: Singapore).
Elf could one day become the world’s top beauty brand
John Ballard (Elf Beauty): The cosmetics brand’s stock price has exploded, rising 500% in the past three years. Last year, Elf Beauty Co. the goal. However, the stock has fallen recently and the company is in the early stages of its global expansion, making now a great time to buy.
In the most recently reported quarter, sales grew an impressive 85% year-over-year. Currently, it is the third largest brand in the cosmetics category in the United States.
Importantly, elf Beauty’s successful expansion into areas such as skin care shows that the brand is gaining significant consumer recognition. These results stem from our focus on providing quality products at affordable prices, topped off with great marketing.
The company also shows significant growth potential internationally. Over the past five years, the company’s overseas sales have grown at an annual rate of 37%, and last year’s growth rate accelerated to 113%.
At a price-to-earnings ratio of 74.5x, the stock’s valuation is high, but I believe it’s worth paying. In fact, the company’s forward P/E ratio of 48 times looks quite reasonable based on Wall Street’s long-term earnings growth forecast of 35% per year. Investors should expect Elf Beauty stock to continue to outperform major indexes through 2024 and beyond.
the future of fashion
Jennifer Cybill (Revolve Group): Like almost every sector, the apparel industry is moving toward greater use of digital channels and artificial intelligence (AI), and Revolve Group is leading that change. Revolve operates two of her luxury women’s clothing websites, Revolve and FWRD, whose AI-powered differentiated models resonate with a loyal and growing customer base.
Revolve uses AI across its business for product selection, but that’s not all. The company has been in the fashion industry for his 20 years and has a wealth of data that they use to design and produce the styles their customers want. Because it’s all online, you don’t have to worry about the cost or time required to bring your apparel to brick-and-mortar stores; you can publish your designs online and start serving them to shoppers immediately after production. Last year, the company created its first-ever AI billboard campaign, leveraging AI for marketing, events, and operations.
Beyond its AI efforts, the company has an innovative marketing model. He works with celebrity and influencer affiliates through his marketing, and also develops design collaborations and capsule collections with celebrity partners. He reaches his target customers of Millennials and Gen Z online and deepens the relationship by hosting physical events and parties.
In general, Revolve’s strategy of offering luxury goods to mass-market consumers has resulted in high sales growth. But these core customers are now cutting back on discretionary spending. Revolve’s fourth-quarter revenue was down 1% year over year, and its net income was down 56%.
However, customer metrics tell a different side of the story. The number of active customers increased by 9% year over year, and the total number of orders increased by 5%. Average order value decreased by 2%. This is not surprising. Shoppers still love Revolve, but they’re spending less.
This is a great indicator of Revolve’s potential when the economy recovers. The company’s marketing strategy is working and Revolve is well-positioned to gain further ground as it provides products that customers love.
Fast casual star with a twist
Jeremy Bowman (Sweet Green): Sweetgreen has struggled since its initial public offering, but it appears investors are finally starting to realize the opportunity in the fast-casual restaurant disruptor.
The stock has already doubled this year after a strong fourth-quarter earnings report that saw revenue increase 29% to $153 million and average sales volume of $2.9 million. Chipotle Mexican Grilla leader in the fast casual segment.
Based on concept alone, Sweetgreen is a promising growth story. The company is pioneering a new category as a fast-casual salad chain, and its high average sales volume clearly shows that there is demand for its products.
But there’s another reason why Sweetgreen can continue to rise this year and move around the stock market.
The company has begun rolling out a technology it calls “Infinite Kitchen.” This is essentially a robotic salad assembly platform that speeds up order preparation and throughput and reduces labor costs.
After opening two restaurants with robotic kitchens, Sweetgreen plans to open seven to nine locations this year and renovate two to four more. This is a significant speedup for the platform.
If the company achieves the expected results, it could be a game-changer for Sweetgreen, and if it can improve profitability in addition to revenue growth and high average sales volume, Sweetgreen’s value could increase. is likely to increase further.
It may take a few quarters, but investors appear ready to reward the positive news given the stock’s post-Q4 earnings rally, with SweetGreen shares still down 57% from their post-IPO highs.
Should you invest $1,000 in Elf Beauty right now?
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Jennifer Cybill has no position in any stocks mentioned. Jeremy Bowman has worked at Chipotle Mexican Grill, Revolve Group, and Target. John Ballard holds a position at Elf Beauty. The Motley Fool has positions in and recommends Chipotle Mexican Grill, Revolve Group, Target, and elf Beauty. The Motley Fool recommends Sweetgreen. The Motley Fool has a disclosure policy.
3 Top Growth Stocks That Could Circle the Market in 2024 was originally published by The Motley Fool.
