He S&P 500 The index has averaged a 10% annualized return over the past half century, but it’s not that difficult to beat that target if you invest in a group of well-chosen growth stocks.
To give you some ideas, a team of Motley Fool contributors see promising prospects in elf beauty (NYSE: ELF), dutch brothers (NYSE: BROS)and Holdings in degrees Celsius (NASDAQ: CELH). Here’s why these stocks should deliver superior returns.
This is one of the fastest growing consumer brands.
John Ballard (Elf Beauty): elf Beauty shares have soared 275% over the past three years. The company’s focus on delivering value in color cosmetics has allowed it to gain significant market share against industry leaders. The company still has tremendous growth potential worldwide, but investors may buy the stock at a more reasonable valuation if the stock falls more than 50% from its February high.
High inflation reinforced elf’s value proposition. In the fiscal first quarter of 2025 ending June 30, sales increased 50% from the prior-year quarter. It is now the second largest brand in the US, with a 12% market share, and management is working to expand the brand globally. International sales account for just 16% of the business, but grew an impressive 91% year over year last quarter.
elf Beauty has promising growth potential and management sees value in the shares following the liquidation. The company recently announced a $500 million share buyback program. The stock has fallen on expectations that higher marketing investments will hurt profits and margins in the near term. However, earnings are still expected to rise 10% this year before accelerating to 26% in fiscal 2026.
Given the huge runway in international markets, the stock should outperform the broader market over the next five years and beyond.
Great coffee, growing sales
Jennifer Saibil (Dutch siblings): How do you open a restaurant chain that basically sells coffee but creates a message distinctive enough to differentiate it from others? starbucks and gain a large number of followers? Ask Dutch Bros. This down-to-earth small-town coffee chain is expanding rapidly, generating high sales growth and developing a growing base of loyal fans.
Dutch Bros has been around for decades as a small, local coffee chain in Oregon. After honing its image and culture and developing a line of popular beverages, it became a public company with big growth plans. For now, it has successfully entered new states on the West Coast and mostly in southern states, and has grown from a total of 415 stores in 2020 to 912 at the end of the second quarter. It opened 159 stores in 2023 and is pursuing a 4,000-store opportunity over the next 10 to 15 years, a goal that involves accelerating expansion.
With the new stores, sales increase. Sales growth has been strong and consistent, reaching 30% year over year in the second quarter. With increased sales and efficient operations come profits, and it has been reporting increasing net income.
An important novelty is digital orders. Despite the seeming need for everyone to go digital these days, Dutch Bros has found great success without it. Now, however, it has trialled mobile ordering in some of its stores and is scheduled to go live by the end of the year. That sets you up for greater success. Between its popular drinks and culture, its new stores, and its digital launch, Dutch Bros should easily be able to maintain strong growth for the foreseeable future.
Dutch Bros shares are up 38% over the past year, outperforming the market, and could be a stock that crushes the market over the next five years and more.
This drink stock has more advantages.
Jeremy Bowman (Celsius Holdings): Celsius Holdings was one of the biggest advancers of the pandemic, rising after the energy drink caught fire. Amazon during the lockdown period.
Since the beginning of 2020, the stock gained more than 5,000% at one point before falling sharply in recent months on concerns about slowing growth, a maturing energy drink category and news that Pepsico had overstock at Celsius, meaning it overestimated demand after becoming a distribution partner.
Celsius stock is down nearly 70% from its high this year, but that creates a good buying opportunity for investors. While the company’s days of triple-digit percentage gains are likely over, the growth story is far from dead, and the stock appears reasonably priced now with a price-to-earnings (P/E) ratio of 31.
In the second quarter, revenue increased 23% to $402 million and its gross margin continued to improve, expanding 320 basis points to 52%, demonstrating that the business continues to become more efficient, benefiting from transportation optimization and lower material costs.
Although there are signs that growth in the overall energy drink category is slowing as a market leader monster drink reported just 6% steady growth in its second quarter, Celsius continues to gain market share with retail dollar share rising 1.4 percentage points to 11% in the second quarter, while growth remains strong at the global level. from stores and clubs and on Amazon.
The result is that Celsius appears oversold after the recent pullback. Investors can take advantage of this as the business still has a promising growth runway ahead.
Should you invest $1000 in elf Beauty right now?
Before you buy elf Beauty stock, consider this:
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has no position in any of the stocks mentioned. Jeremy Bowman has positions at Amazon and Starbucks. John Ballard has positions at Dutch Bros. The Motley Fool has positions and recommends Amazon, Celsius, Monster Beverage, Starbucks, and elf Beauty. The Motley Fool recommends Dutch Bros. The Motley Fool has a disclosure policy.
3 Monster Stocks That Can Crush the S&P 500 in the Next 5 Years was originally published by The Motley Fool