While the primary goal of investing is to achieve satisfactory returns, there is certainly no shortage of styles of investing. Some prefer good deals that sell for cheap valuations, while others seek out companies that quickly grab market share in their respective industries.
This latter category of stocks is particularly intriguing, mainly because of how exciting it can be to own stocks in growing companies. If you want growth stocks, The place of children (NASDAQ: PLCE), Lululemon (NASDAQ: LULU), and The commercial counter (NASDAQ: TTD) are some of the best companies to buy today.
An e-commerce stock undercover
Jeremy Bowman (Children’s Place): If you’re looking for underrated retail inventory, it’s hard to find a better choice than The Children’s Place. Like most clothing retailers, the business has been derailed by the pandemic, but is back on track and showing solid growth. Not only that, but it’s trading at a very low price, valued at a price-to-earnings (P / E) ratio of less than 7 based on expected earnings per share (EPS) this year of $ 11.24.
Analysts have also largely underestimated the company’s recovery, as it has beaten EPS estimates in each of the past four quarters.
The children’s clothing retailer has taken an unconventional approach. Since 2013, it has been gradually closing its stores and converting its activity to e-commerce, which has enabled it to record record results. Digital sales accounted for 43% of its revenue in the second quarter of 2021, compared to 29% in the second quarter of 2019, and more than 70% of that activity came from mobile devices.
The management aims to achieve 50% of its business through digital channels and has been an industry leader in the backbone to e-commerce. Essentially, the business is in the process of shifting from a physical retail chain to an online clothing retailer, and children’s clothing is a good fit for the category, as parents are often pressed for time and that it is easier for children to try on clothes at home.
The good news for investors is that the company typically makes almost all of its profits in the second half of the year, thanks to the back-to-school and holiday season. In the second quarter update, CEO Jane Elfers said, “We saw a significant acceleration in back-to-school sales during the last two weeks of July, and the third quarter got off to an exceptional start. This bodes well for the third term, especially as parents can be eager to spend on school supplies after many suffered from a year of school closures.
Given this outlook for the current quarter and the single-digit P / E valuation, the stock could rebound considerably higher by the end of the year.
More than just yoga pants
Neil patel (Lululemon): As a thriving athlete-clothes brand, Lululemon has achieved impressive revenue and profit growth of 182% and 288%, respectively, over the past five years. In an otherwise mature and stable industry, this kind of performance is remarkable.
The company had another stellar quarter in the second quarter, beating Wall Street expectations on both bottom lines and bottom lines. Management also raised its annual forecast, forecasting sales of $ 6.23 billion and EPS of $ 7.21. The stock jumped 10% on the news.
What started out as a business selling yoga pants to women has now grown into an extremely popular clothing brand for everyone. In the last two years, the growth of the category of men has exceeded that of women. And Lululemon is on track to meet its goal (set in 2018) of doubling male activity this year.
There are other growth levers that the company can draw on. CEO Calvin McDonald believes international sales, which accounted for 14% of total business in fiscal 2020, will one day be on par with North America. Lululemon is relying heavily on this strategy, as the vast majority of its new store openings (35 to 40) during the year will be in foreign markets.
And don’t forget MIRROR, the home fitness company that Lululemon bought last year for $ 500 million. Working out in the comfort of your home has become increasingly popular thanks to the pandemic, and Lululemon now has a legitimate product on the market.
“We are playing for the long haul and have a lot to unlock in the years to come. We’re also excited about how MIRROR can be the vehicle through which we deliver long-term benefits to our customers, such as membership programs and special experiences, “McDonald said on the earnings call. Q2 The MIRROR shop-in-shops are now in 150 Lululemon stores, and more are underway.
Since Lululemon sells its merchandise primarily through its website and company-owned stores, it has the ability to control how its brand is viewed by consumers by tightly controlling inventory and avoiding price cuts. Direct-to-consumer sales, which account for 41% of quarterly revenue and a gross margin of 58.1%, underscore just how powerful the brand really is. And it is a key differentiator of the company compared to competitors like Nike, Under protection, Where Adidas.
This stock was a big winner for investors, but I think there is still a long way to go. Expect the pioneer of athleisure to continue to thrive in the years to come.
Ride the wave of digital advertising
Eric Volkman (the negotiating office): The reach and demand for digital advertising will only grow, and robustly, over the next few years. The Trade Desk, a company that operates a dedicated and very convenient platform for advertisers looking to access the media, is the perfect stock to take advantage of this potentially explosive opportunity.
Correction: This market is already expanding, and the company has done a solid job capitalizing on the opportunity. In less than half a decade, especially from 2016 to 2020, Trade Desk revenue has more than quadrupled (to over $ 836 million in the last year).
With light expenses as an advertising service provider with an established software platform, The Trade Desk is very profitable. During the same period, net income has grown from just under $ 20.5 million to over $ 242 million. Net margins have also improved significantly, from 10% in 2016 to almost 30% last year.
Meanwhile, the company’s long-term debt ($ 255 million at the end of June) is manageable, given that it had nearly double the cash on its books. He also had more on the way, because his cash flow is positive. Free Cash Flow (FCF) over the past 12 months was over $ 321 million.
Investors might be a little timid of the Trade Desk these days due to the vague indications it gave in its last quarterly earnings report. Admitting that, “Like many advertising-supported businesses, we face a period of heightened uncertainty in our business outlook,” the company provided only limited estimates for its current quarter.
Still, these look encouraging, as he anticipates revenue growth of at least 30% year over year and roughly the same for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA ). Even in uncertain times, the Trade Desk is therefore certain that its numbers will rise at envious rates.
According to next-generation market research firm eMarketer, total global digital advertising spending will increase by 42% from 2021 to 2024. It’s still a young market and the trail is long; One company that seems poised to achieve ever higher profitability is The Trade Desk.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.Source link