With the S&P 500 down about 5% so far this year, investors might be hesitant to put some money to work. This would be a mistake as the stock market is a wonderful tool to build long-term wealth. And even a relatively small sum of money can go a long way.
Investing $2,000 equally -- as part of a well-diversified portfolio -- among Block (SQ -1.68%), Etsy (ETSY 0.49%), and The Joint Corp. (JYNT -1.63%) is likely to be a smart move.
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Block
Formerly known as Square, Block is a leader in the digital-payments space that had a stellar 2021 performance. Gross profit for personal finance service Cash App jumped 69%, compared to 2020, while gross profit for the Seller ecosystem (called Square) surged 54% year over year. These results were more impressive given the difficult comparisons in the prior year.
The tremendously popular Cash App, which lets users send and spend money, as well as set up direct deposit and invest in stocks and Bitcoin, had 44 million monthly transacting users in the latest quarter. And Square, a mission-critical partner that helps small businesses run their daily operations, processed $42.6 billion in payment volume in the fourth quarter, driven primarily by the growth of larger sellers (those with annual volume greater than $500,000).
Block's acquisition of buy now, pay later (BNPL) leader Afterpay closed on Jan. 31, supporting the company's growth ambitions in the popular payment product. Afterpay's BNPL feature is now integrated into Sellers' checkout offering in the U.S. and Australia, which will only help to integrate the Square and Cash App ecosystems even more, strengthening their connection.
Because Block's stock is down 43% in the past six months, investors have the chance to buy shares right now at a price-to-sales multiple of 4, the lowest level in about five years. This is a fast-growing business in the lucrative payments industry that deserves your investment dollars.
Etsy
Known as the leading destination for special, handcrafted, and vintage goods, Etsy is one of the most popular e-commerce shopping destinations. Fourth-quarter revenue of $717 million and diluted earnings per share of $1.11 both easily crushed Wall Street's estimates. And during the fourth quarter, gross merchandise sales (GMS) hit a record $4.2 billion, up 16.5% year over year.
Etsy now has 7.5 million active sellers and 96.3 million active buyers on its platform, demonstrating the true scale of the business. Habitual buyers, or those with six or more purchase days and at least $200 in spend over the trailing-12-month period, remained the fastest-growing buyer cohort.
The company experienced massive growth thanks to the pandemic, when consumers shifted their spending away from brick-and-mortar retail and toward e-commerce. But Chief Financial Officer Rachel Glaser believes that Etsy can continue to thrive in a more normal economic environment. Even with the fading effect of government stimulus checks, as well as the impact of reopening economies, she expects higher GMS growth in the second half of 2022 compared to the first half of the year.
Etsy's stock is down 50% off its all-time high closing price set on Nov. 24, dragged down by the broader market sell-off of tech-focused stocks. Astute investors would be wise to pounce on the opportunity to buy shares in a business that's riding the growth of e-commerce.
The Joint Corp.
If you only looked at the cratering share price of this small-cap healthcare stock, which is down 65% over the last six months, then you'd miss the impressive financial results that it produced. The Joint had another superb year in 2021 as sales surged 37.8% over the prior year, and the annual gross margin was a remarkable 89.5%. Same-store sales also increased 29% year over year.
The company offers an affordable and accessible solution for patients with back pain by providing a quick and effective spinal adjustment by licensed chiropractors. The Joint Corp. performed 10.9 million adjustments in 2021, up meaningfully from the 8.3 million completed in 2020. What's more, 36% of patients had never been to a chiropractor before.
Critical to the company's growth strategy is opening more of its low-cost clinics at a rapid pace. There are currently 706 locations, of which 610 are franchised and 96 are company-owned, across the U.S. But management thinks the long-term potential domestically is 1,950 clinics, nearly triple the current footprint. At this scale, The Joint's 2021 profit margin of 8.1% is sure to expand significantly.
Shares are currently trading hands at 6.8 times trailing-12-month sales. At first glance, this valuation doesn't scream cheap. However, if you understand the massive growth opportunity for the company in the years ahead, it's not a demanding price to pay.
