Sometimes people put off starting out on their investing journeys because they feel that they don't have enough money to put into the market right now. But the best advice I can give is to just get started. When you invest, you are becoming part owner of the business whose shares you buy, and the good ones should grow over the long term.
With many brokerages now offering commission-free trading, there is little cost to dipping your toes in the water and buying a growth stock you can buy and hold for the next decade or more -- and then doing it again the next month. The good news for those just getting started is that after a turbulent start to 2022, many growth stocks are now trading at a discount to where an investor would have been buying them just a few months ago.
Here are two growth stocks that give you ownership of a piece of two dynamic, high-growth businesses that you can buy now for under $100.
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Floor & Decor
Floor & Decor Holdings (FND 1.06%), as you might guess from its name, is a retailer specializing in flooring and related items. That's generally a pretty good business. But its shares are currently down over 40% from their 52-week high amid a broader market sell-off. Concerns over rising mortgage rates have particularly hurt stocks with exposure to housing. Still, the company's longer-term look remains strong.
Floor & Decor's goal is to grow its store count to 500 stores in the coming years. Currently, it has 160 stores, so this target is three times the size of its current footprint. The company has already grown its store count by 17.8% on an annualized basis over the last five years, and plans to ramp this rate up to 20%. This is an aggressive growth rate, but there is more than enough headroom. Even after hitting 500 stores, Floor & Decor would still be less than a quarter the size of Home Depot or Lowe's Companies (L 0.96%) by store count.
Store-count growth is well and good, but many companies unfortunately eschew profitability to goose growth. Fortunately, that is not the case with Floor & Decor, where the stellar growth has not come at the expense of profits. Comparable-store sales (which measure the year-over-year sales of locations open for at least a year) have been positive for 13 years and counting.
And this sales growth is flowing through to the company's bottom line. The company has grown its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) at a 32% compound annual rate over the last five years, while increasing its earnings per share at a 37% rate. While shares are not necessarily cheap at 22 times next year's earnings, this is not an unreasonable price to pay for a company that is growing and executing at a high level as it is doing.
Dutch Bros
Speaking of store-count growth, Dutch Bros (BROS -1.41%), the Oregon-based purveyor of coffee, teas, and energy drinks with names like the Dragon Slayer and the Dinosaur Egg, is another company growing at a scorching pace. Yet, like Floor & Decor, shares of Dutch Bros are also down about 40% from their 52-week high, following a torrid run-up after its initial public offering and a subsequent sell-off that has hit many high-flying growth stocks.
Dutch Bros has been growing at an impressive rate, and it is planning on keeping its foot on the gas and accelerating this expansion even further. The company has a total of 538 locations after adding new ones at a compound annual growth rate (CAGR) of 44.4% over the past four years. Growth is accelerating even further with the company adding 97 locations in 2021 and planning to open 125 in 2022.
There should be plenty of room for Dutch Bros to continue with this strategy, as it currently only operates in 12 states, mainly on the West Coast and Intermountain West, with only a handful of stores east of the Mississippi River. There is little risk for saturation as even after Dutch Bros hits its goal of 125 new locations this year, its store count will only amount to about 4% of the size of Starbucks' domestic store count.
As you would expect with rapid store-count growth like this, revenue is also growing quickly -- from just $186 million in 2018 to $498 million last year, a CAGR of 38.8%. Even better, the company is guiding for revenue of $700 million to $715 million this year, which is 40% higher than 2021's record-setting sales. Dutch Bros is growing new units rapidly but it is still keeping its eye on the ball with existing shops. The company increased comparable-store sales growth by 10% last quarter.
Dutch Bros is firing on all cylinders, and if it one day meets its long-term goal of 4,000 stores nationwide , investors who start a position now will be shareholders in an incredible long-term growth story.
