Investing in growth stocks is a good way to turn your $10,000 into a whole lot more over the long term. But before diving in, it's important to consider a couple of things. First, look at today's momentum -- that could be share price and/or revenue growth. And second, look for elements that will potentially keep this momentum going. Of course, behind the scenes, the company's strategy and financial decisions are key for long-term success too.
So, which stocks should you consider if you've got $10,000 to invest right now? I'm thinking of an expanding online retailer, a maker of activewear inspired by yoga, and an up-and-coming biotech company. They have momentum, solid future prospects, and a smart strategy. Let's check them out.
Image source: Getty Images.
1. Etsy
Etsy (ETSY -0.22%) is an online marketplace that brings together sellers and buyers of handmade goods. The company has progressively grown its revenue over the past few years. But sales and profit really took off last year -- during the worst of the pandemic -- when people favored online shopping more than ever.
ETSY Revenue (Annual) data by YCharts
The good news for Etsy and its investors is that the move to online shopping isn't just temporary. It's a shift that's set to last. More than 40% of U.S. shoppers today usually shop online for things they previously would have bought in stores, according to EY's research. We can see that in Etsy's recent earnings report. Gross merchandise sales climbed more than 17% to $3.1 billion in the quarter.
Moving forward, customer loyalty and Etsy's smart acquisitions should keep growth going. Habitual buyers -- those with at least $200 spent over six purchase days in the past year -- increased 65% in the quarter. And this year, Etsy acquired a Brazilian online marketplace for handmade goods, as well as a global fashion resale player.
Etsy's return on invested capital has gradually climbed over the past few years. And that's an excellent sign for the future.
ETSY Return on Invested Capital data by YCharts
2. Lululemon
Lululemon Athletica (LULU 0.77%) continued growing revenue through the early days of the pandemic. The key to success was its connection with customers and strong online platform. These days, revenue and profit growth continues at the maker of activewear. In the most recent quarter, sales climbed in women's, men's, and accessories categories. And overall net revenue rose 30% to $1.5 billion. Diluted earnings per share also increased about 30% to $1.44.
Here's what is even more encouraging: The company has been meeting and exceeding the goals of its Power of Three growth plan. For example, full-year 2021 revenue guidance implies a two-year compound annual growth rate (CAGR) of 25% to 26% -- that's way ahead of the Power of Three forecast for a CAGR in the low teens. The plan also involves making significant gains in men's, digital, and international sales. All of this is happening.
Lululemon's shares have climbed about 17% this year. The shares aren't cheap at a trailing-12-month price-to-earnings (PE) ratio of about 64. But the PE ratio has declined 20% this year.
LULU PE Ratio data by YCharts
So now may make a reasonable entry point -- especially considering today's strong performance and future prospects.
Image source: Getty Images.
3. Novavax
Novavax (NVAX) isn't yet generating product revenue or a profit. But that may be right around the corner. And it could be in the billions. Here's why: The biotech company just filed for the emergency use authorization of its coronavirus vaccine candidate in a handful of countries. So far, Indonesia and the Philippines have given it the nod. The company expects to file in the U.S. before the end of the year.
Novavax already has contracts to deliver doses around the world -- for example, to the U.S., the European Union, and to lower- to middle-income countries through the COVAX initiative. The company said earlier this year that it expects billions of dollars in revenue over a period of four to six quarters.
But Novavax's potential isn't linked to the coronavirus alone. The company also has a flu vaccine candidate that met all primary endpoints in a clinical trial. The next step for that potential product is regulatory submission. And Novavax is also studying its flu candidate with its coronavirus vaccine candidate as a combined vaccine. So Novavax offers revenue growth potential well into the future.
The shares of this company skyrocketed last year -- with an increase of more than 2,700%. But this year, gains have been modest by comparison. The stock is heading for a 49% increase. And it's even trading below Wall Street's lowest 12-month price forecast. So, today may be a good time to get in on this vaccine stock with the potential to make you richer over the coming decade.
