- Though their valuations may look expensive, SoFi’s sales growth rates are phenomenal.
- Not only does Trex offer its customers eco-friendly products, but also its shareholders’ market-crushing returns.
- Although Yeti is the slowest grower, it has a group of highly dedicated fans.
If you plan to invest $100 in these growth stocks, there are a couple of things to consider. Foremost, the market’s reaction to a company’s latest earnings report should not be nearly as crucial to your stock buying and selling decisions as making sure your investment thesis in that company remains true.
Let’s look at three stocks: SoFi Technologies (NASDAQ:SOFI), Trex (NYSE:TREX), and Yeti (NYSE:YETI). Although Trex and Yeti both had mixed earnings reports, SoFi’s statement was excellent. Furthermore, the investment thesis for each company looks much healthier than before. Even so, these three stocks have declined in value by 47% or more since the beginning of the year.
It makes sense to invest $100 in these growth stocks for the long term; keep reading to learn why.
SoFi, a fintech firm with 6.5 million goods and 4.3 customers, aspires to become a significant financial platform. However, even though SoFi’s income rose by 44% last year, its share price fell by 57%. This was most likely due to the common aim of many members: financial autonomy.
SoFi offers a varied growth palette that combines natural diversification with three operational segments: lending, technology platform, and financial services. Its oldest line of business, student loans, saw originations fall by more than 50% year over year in the second quarter of 2022. Despite this, overall revenue increased by 50% in the same period, owing to personal loan originations increasing nearly doubling.
Fintech solution momentum
Furthermore, SoFi’s technology platform and financial services divisions provide a flywheel of fintech solutions. These units accounted for roughly a third of SoFi’s income in Q2 2022, despite accounting for less than 3% in early 2020. With these developing components increasing at almost triple-digit percentages year over year, SoFi’s gradually improving profit margin is extremely promising.
Finally, SoFi’s technological platform acting as the rails on which the broader financial technology industry runs makes it an excellent way to benefit from the seemingly unstoppable adoption of digital banking.
Although environmentally friendly patio decking may not scream market-leading returns, Trex, an outdoor living specialist, has seen a 1,200% rise in value over the last decade.
Trex, a brand of composite decking made from sustainable products such as reclaimed wood fibers and recycled polyethylene film, has taken the market by storm by providing deck builders with a more durable and less-maintenance alternative to wood. While Trex’s products are initially more expensive than wood, they have a longer lifespan. Trex is a more affordable option than wood decks in the long run, as wood decks have higher maintenance costs. You would only need to wait three years for Trex to pay off versus wooden decks.
Trex has been an outstanding performer both economically and environmentally. Over the last three years, the firm has grown revenue and earnings per share (EPS) by 25% and 29%.
Trex has delivered an increase in revenue of 24% and earnings of 49% in its most recent quarter, despite a problematic supply chain environment. This growth demonstrates the value of Trex’s vertically integrated operations and the public’s interest in environmentally friendly alternatives to wood. On the other hand, wood currently accounts for 75% of deck purchases. This means Trex has a long way to go in terms of revenue. Nevertheless, its management team predicts that each percentage of market share it converts to composite sales will be worth $80 million in extra annual income.
This company looks like a great buy and hold for the long term because it has been trading at its lowest price-to-earnings ratio in the last decade.
Even though Yeti’s sales increased by 17% from the previous year, shares of the company have continued to go down this year.
Yeti’s shares have been declining recently due to its gross profit margin dropping by more than 6 percentage points in Q2 2022. Furthermore, management predicts that EPS will drop by 5% to 10% for the full year. In addition, Yeti has been struggling with higher inbound freight costs for its products, which caused EPS to decline by 7% for the latest quarter. However, despite these short-term issues, Yeti’s brand strength is rising.
Growing brand awareness
Not only is Yeti’s brand awareness growing, but it also boasts 1.7 million Instagram and 300,000 TikTok followers. That is an atypically broad reach for a small-cap firm.
Yeti’s rapidly expanding direct-to-consumer (DTC) and international sales may be a bargain too good to pass up, even though its stock is trading at less than 17 times earnings now.
Yeti’s international sales saw a 35% year-over-year growth in the second quarter, but they only make up 12% of the company’s revenue. This means that there is still plenty of room for long-term growth.