Some investors may see declining share prices as a signal to exit the market. However, I have a different view: Lower share prices should be viewed as an opportunity to accumulate the stocks of great businesses for the long term. As these companies grow their profits, cash flows, and dividends, their share prices will also rise, thus allowing you to compound your wealth and get ever closer to your dream retirement.
That said, selecting the right companies should involve a careful process that focuses on key attributes. Some of these characteristics are: being a dominant player within its industry, having a great track record of surviving through challenging times, and possessing catalysts that act as tailwinds to sustain growth for years, or even decades. The three businesses below have the above qualities and more, and may deserve places in your investment portfolio.
Lululemon (LULU 0.27%) is a market leader in the yoga and running sports apparel and footwear sector, and its innovative fabrics and attractive designs are inspiring more people to purchase its wide range of products. The company's growth has been stunning, as it increased its sales and net income throughout the pandemic by leveraging heightened demand for home exercise and healthy lifestyle equipment. Net revenue jumped from $3.98 billion for fiscal 2020, ended Feb. 2, to $6.3 billion for fiscal 2022 (FY2022). Net income surged by 51% from $645.6 million to $975.3 million over the same period.
Lululemon's retail store count has also increased in tandem with its top and bottom lines. Total company-operated stores increased from 491 in FY2020 to 574 in FY2022. The first half of fiscal 2023 (1H2023) saw this momentum continuing, as the company reported a 30.1% year-over-year jump in revenue to $3.48 billion. Net income climbed 35.8% year-over-year to $479.5 million, and the sports apparel giant ended the quarter with 600 company-operated stores.
There could be more to come as Lululemon announces an ambitious five-year plan to double its revenue from FY2021 levels to $12.5 billion by 2026. The company intends to tap on three pillars to fuel this growth. The first is product innovation, meaning new product categories will be launched to capture a larger slice of the market. The second is to build stronger connections with its customer base by launching a new, two-tiered membership program later this calendar year. And the third is to expand its international revenue by entering new countries. Investors already got a taste of the third initiative when Lululemon announced its plan to launch an e-commerce platform in Spain and open stores in both Madrid and Barcelona. With this plan in action, it looks like Lululemon is on track to enjoy many more years of steady growth.
When it comes to energy drinks, no one does it better than Monster Beverage (MNST 0.51%). The company has grown steadily throughout the pandemic, as demand for its wide range of energy drinks remains robust. Net sales stood at $4.2 billion in 2019 and rose to $5.5 billion by 2021. Net income increased from $1.1 billion to $1.4 billion over the same period, with the number of cases sold jumping from 448.8 million to 613.4 million.
Monster's recent earnings report continues to impress, with second-quarter net sales hitting a record high of $1.66 billion, up 13.2% year-over-year. The first half of 2022 saw sales rise 17.3% year-over-year, but a sharp increase in the cost of sales due to increased freight rates, fuel costs, and higher aluminum prices led to a 21.1% year-over-year decline in net income during the period. The higher costs are temporary, though, and should work themselves out of the system in due course.
The company has stated that product supply is normalizing and a price increase has been implemented in the U.S. at the beginning of September. Price increases in selected international markets are also planned for the second half of this year, and the company also released a new product "The Beast Unleashed", its first alcohol-based product under its main brand. With its strong brand name and pricing power, Monster's earnings look set to resume their growth once the company works out the kinks in its supply chain.
DocuSign (DOCU 0.92%) is a market leader in digital signatures, and its DocuSign Agreement Cloud offering allows individuals and businesses to electronically sign documents conveniently and securely. The company saw its business benefit strongly from a surge in digitization caused by the pandemic, and its revenue from fiscal 2020 (FY2020) to FY2022 more than doubled from $918.5 million to $2.04 billion. DocuSign also narrowed its net loss from $208.4 million to $70 million over the same period.
More importantly, DocuSign generated healthy free cash flow for both FY2021 and FY2022 of $214.6 million and $445.1 million, respectively. Its track record of growth has continued into the first half of fiscal 2023 (1H2023), with revenue rising 23.4% year-over-year to $1.2 billion and the company generating $280 million of free cash flow. DocuSign estimates that its total addressable market is around $50 billion, which should offer sufficient room for the company to continue growing. It intends to accelerate its growth by driving greater adoption of e-signatures and by pushing its notarization product, as well as expanding into new areas such as analytics and driving new use cases throughout organizations.