With the S&P 500 down by 6% this year, long-term investors may find this an opportune time to pick up shares in certain companies. After all, putting your money to work in stocks for a decade smooths out the short-term volatility.
For growth stocks, this could prove an especially good time to jump in. These companies increase revenue and earnings at a rapid clip, and investors often bid up their share prices. However, the overall market drop has caused these stocks to fall, too.
Two companies you should consider buying now are Dollar General (DG -0.59%) and Texas Roadhouse (TXRH 0.18%). Both have seen their share prices fall by more than 6% this year. But with strong, long-term prospects, these are stocks you can tuck away for the next decade.
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Dollar General
In 2021, Dollar General had an off year, but that was understandable. For fiscal 2021, same-store sales (comps) fell by 2.8%, breaking a 31-year streak of positive comps. But 2020's comps increased by a strong 16.3% as the start of COVID-19 caused people to rush to the stores to buy basic necessities.
Management expects positive comps to resume in the second quarter, however. For the year, it anticipates comps to increase by 2.5%.
Its low prices -- most items are priced under $10 -- have proven successful over time. Dollar General mostly sells everyday items like paper towels and toilet paper but also offers other merchandise, such as toys, batteries, light bulbs, and clothing.
Already successful, the company has a host of initiatives to keep growing sales and profits. For starters, Dollar General has been opening about 1,000 stores annually and plans to expand by more than 1,100 this year.
Then there's DG Fresh, which offers fresh and refrigerated goods at store locations. Launched a couple of years ago, the test went well, and DG Fresh has been rolled out to all of its stores. Management stated it was happy with the progress on sales and margins.
Also promising is Dollar General's "pOpshelf" concept, which offers a "treasure hunt" experience. These stores price their items at $5 or below. Launched in 55 locations so far, the rollout is still in an early stage but has surpassed management's 50-store goal.
This year, management expects Dollar General's sales to increase by 10% and earnings per share to grow by 12% to 14%. This guidance comes during a period when retailers, including Dollar General, have been confronting higher costs and supply-chain challenges, making it all the more impressive.
Texas Roadhouse
People returned to restaurant chain Texas Roadhouse as soon as they were able to eat out again. You needn't look further than last year's results. Revenue grew 40.4% to $895.6 million, while income from operations increased by about 218% to $64.8 million. Impressively, revenue and profits were well above 2019's figures, which was before the pandemic struck.
Last year, comps increased by 37.8%. And Texas Roadhouse has gotten off to a good start in 2022, with comps 20.6% higher in the first seven weeks of the year. Although higher food and labor costs are challenges, the company was able to offset some of these with price increases. Management claims not to have seen a negative reaction. In the fourth quarter, the company's restaurant margin was 15.8%, 2.5 percentage points more than the previous year.
The Texas Roadhouse chain, with moderate prices and good food, is the main driver of profitability. Last year, management added 27 new locations, including three franchised international restaurants. Its other major chain, Bubba's 33, attracts customers to watch sporting events while eating burgers and wings. Management plans to add a total of 25 Texas Roadhouse and Bubba's 33 restaurants this year.
There are 596 domestic and 31 international Texas Roadhouse locations and only 36 Bubba's 33, leaving both chains room to grow.
Dollar General and Texas Roadhouse are two growth stocks that have fallen with the overall market. But both remain popular with their customers and have room to continue growing revenue and profitability. That adds up to a good opportunity to pick up shares.
