It's tough to be a growth investor right now. The NASDAQ Composite Index has fallen into a bear market while the Federal Reserve is caught between a rock and hard place, trying to rein in inflation while avoiding a full-blown recession. Although stock prices have fallen across the board, it's important not to panic. Rather, you should view this as an opportunity to scoop up shares of strong companies on the cheap.
Of course, buyers need to be discerning and select businesses with attractive attributes that will enable them to not just weather a downturn, but also continue to do well thereafter. The characteristics I look for include a strong, well-recognized brand, a track record of convincing growth, catalysts in place to propel further growth, and a management team with strategic plans to expand the business.
These three growth stocks demonstrate all those traits, and look like enticing investments now.
One of the most well-known electric car companies in the world, Tesla (TSLA -2.22%) also invests in scalable, clean energy generation and storage products. From its first premium Model S to its new high-volume, mass-market-priced Model 3, it has shown that it can innovate to bring sustainable transportation to the masses. In the second quarter, total production of all four of Tesla's models rose 25% year over year to 258,580 units, while total deliveries increased by 27% year over year to 254,695 units. The increase in production and deliveries highlight the strong demand for its electric cars.
A combination of increased vehicle deliveries, coupled with higher average selling prices, has propelled its earnings upwards. Total revenue surged 42% year over year to $16.9 billion while operating income soared 88% year over year to $2.46 billion, chalking up an operating margin of 14.6%, higher than the 11% margin a year ago. Net income nearly doubled year over year to $2.3 billion while free cash flow stayed virtually flat at $621 million.
With governments around the world making efforts to transition to sustainable, low-carbon energy solutions, and with many promoting electric vehicles, Tesla's growth outlook is promising. The company has grand plans to quickly scale its manufacturing capacity to achieve a 50% average annual growth in vehicle deliveries, depending on its factories' uptime and operating efficiency.
Despite a plunge of nearly 32% in the stock's price year to date, CEO Elon Musk remains confident about the company's prospects. He says he believes that demand will remain buoyant, and that Tesla's top-line performance is currently constrained by production issues. Once these are resolved, the company could post steadily higher revenue and profits.
Tractor Supply Company
Farmers and ranchers have long relied on Tractor Supply Company (TSCO -1.25%) for a host of their farm, land, and home needs. The company operates more than 2,000 stores in 49 states and prides itself on being the largest rural lifestyle retailer in the U.S. Its second-quarter financials show it's going strong, with sales increasing 8.4% year over year to $3.9 billion and comparable-store sales improving by 5.5%.
Operating income rose 8.1% year over year to $525 million while net income climbed 7.1% to $396.5 million. The dividend per share for the first half came to $1.84, up sharply from the $1.04 paid out in the first half of 2021 -- a sign that Tractor Supply's management is confident of its business momentum. Free cash flow remained healthy at $360.3 million, and the retailer has raised its full-year revenue outlook from the previous $13.6 billion to $13.8 billion range to a $13.95 billion to 14.05 billion range.
Membership in Tractor Supply's loyalty program, Neighbor's Club, continues to grow, up 24% year over year to more than 26 million. The company sees the potential to reach a total of 2,500 stores in the medium term and has recently upped its target to 2,700 in light of strong tailwinds. It believes its total addressable market is around $180 billion, and given that it currently controls just 7% of that, it has plenty of room for growth.
With the pandemic having pushed much of the world toward greater use of digital devices such as laptops and smartphones, CrowdStrike (CRWD -1.56%) should find itself in an enviable position. The cybersecurity firm, founded in 2011, offers its Falcon software-as-a-service platform to protect companies' cloud computing systems from security threats. It not only offers constant online protection but also leans into data analysis and continuous learning so that it stays abreast of the latest threats.
For its fiscal 2023 first quarter, which ended April 30, revenue surged 61.1% year over year to $487.8 million while net loss narrowed significantly from $85 million to $31.5 million. More importantly, the company's free cash flow jumped 34.3% year over year to $157.5 million. What's more, CrowdStrike ended the quarter with 17,945 customers, up 57% year over year. Compared to the 1,242 customers it had at the end of fiscal 2018, that's more than 13-fold growth.
What's exciting is the potential for CrowdStrike to grow even further in the coming years. Annual recurring revenue has shown a strong uptrend, going from just $71 million in 2018 to $1.9 billion in its latest quarter. Its dollar-based net retention rate has also stayed consistently above 120% since 2019, implying strong customer stickiness. The company's total addressable market is estimated at $58 billion for all its cloud modules and is poised to grow at 10% per year over the next two years to $71.1 million. Coupled with its planned product offerings, CrowdStrike's total addressable market has the potential to expand to $126 billion by 2025.
While each of these companies is in very different areas, all offer solid potential for growth ahead -- and are worth a closer look by investors.