Heading toward the end of the year, it's no secret that 2022 has been a year to forget for growth stocks. The S&P 500 and the Nasdaq are down 23% and 31% year to date, respectively, and many popular growth stocks are down more than that.
But that doesn't mean that it's time to stop investing in great growth stocks. Investing is a long-term game, and the sell-off means it's as good a time as any for long-term investors to accumulate positions in top growth stocks. While it may be tempting to try to wait out the bear market, research shows that trying to time the market doesn't pay off in the long run, and some investors unfortunately miss out on some of the market's best returns by trying to time it.
With this in mind, let's take a look at three great long-term growth stocks with the potential to soar that you can buy now.
Image source: Getty Images.
1. Bowlero
NYSE: BOWL
Key Data Points
While you may not associate bowling with growth, the industry is growing at a steady pace and posted a CAGR (compound annual growth rate) of 4% a year from 2010 to 2020. Bowlero (BOWL 1.16%) is the 800-pound gorilla in this market, and it is growing faster than the broader industry.
For fiscal 2022, Bowlero enjoyed record revenue of $912 million. This represents incredible year-over-year revenue growth of 130%. Bowlero also compares results to the pre-pandemic period of 2019, as 2020 and 2021 were disrupted by COVID restrictions on indoor gatherings and are easy comps.
By this measure, revenue is now 31% higher than it was in fiscal 2019, so Bowlero isn't just a beneficiary of lapping easy comparables -- its sales are much higher than they were before COVID. In terms of profits, Bowlero grew adjusted EBITDA by 81% over the same time frame.
Bowlero is doing this both by acquiring independent bowling centers and adding them to its portfolio of brands and by increasing same-store sales at its existing locations. During the most recent quarter, same-store revenue was 57% higher than it was during the corresponding period of 2019. Bowlero is bolstering revenue growth at existing locations by adding arcade games and other entertainment, as well as with food and beverage sales.
The strong same-store revenue growth shows that Bowlero isn't taking its eye off the ball with existing locations while it is opening new ones. The bowling industry is fragmented, and there are many independent bowling alleys that Bowlero can potentially acquire. Many owners are getting older or want to sell for a variety of reasons, and Bowlero is able to take advantage of its scale and resources to make acquisitions and add these bowling centers into its portfolio. During fiscal 2022, Bowlero acquired 22 bowling centers.
With impressive revenue growth, same-store sales growth, and a steady stream of acquisitions being added to the fold, Bowlero looks like a strong bet to keep growing at an explosive rate for years to come and thus looks like a strong buy.
2. Floor & Decor
NYSE: FND
Key Data Points
Floor & Decor (FND +5.63%) is a monster growth stock that is down 50% year to date, creating an attractive entry point for long-term investors. The stock is down because the hardwood flooring retailer has been lumped in with other housing- and home improvement-related names at a time when rising mortgage rates has roiled the housing market.
But look past the short-term noise, and you'll see why this Warren Buffett stock is a long-term winner. The retailer, which specializes in hard flooring surfaces like tile, wood, laminate, and stone, has grown revenue at a scintillating 25% CAGR over the past five years. Not only is Floor & Decor growing sales, but it is doing so profitably, as earnings per share have increased at an even more impressive 37.1% CAGR over the same time frame.
Like Bowlero, Floor & Decor keeps growing its store count while simultaneously keeping its eye on the ball and growing same-store sales growth. During the most recent quarter, the company increased same-store sales by 9.2% versus the year before. Floor & Decor is ramping up its store count, which has grown at a 17.8% CAGR over the past five years.
The company now has 174 warehouses and five design studios, but management sees long-term potential for 500 locations, meaning that there is much more growth to come. If Floor & Decor can keep growing profitably as it matures into this footprint, shares should be worth significantly more than they are today.
3. Dutch Bros
NYSE: BROS
Key Data Points
Like Bowlero and Floor & Decor, Dutch Bros (BROS +3.31%) is a company that is growing its number of locations at a rapid rate. Through the first half of 2022, the company has grown its store count at a 39% CAGR over the last five years. The Oregon-based purveyor of hot and cold beverages ranging from coffees and espressos to its wide array of eclectically named energy drinks has also grown revenue at a 26.7% CAGR over the same time frame.
Just like Floor & Decor, Dutch Bros has its sights set on even more growth ahead. While the company now has 603 locations, management's goal is to expand to 4,000 locations over the next 10 to 15 years. Shares of Dutch Bros are down 38% year to date, as the company deals with challenges like inflation for labor and key inputs like dairy and elevated gasoline prices hurting discretionary income.
But these are short-term pressures that will eventually subside, and Dutch Bros looks like an attractive long-term investment as it expands its store count, grows revenue, and works toward profitability.
While the market is volatile at the moment, long-term investors have the opportunity to buy some top growth stocks with the potential to evolve into long-term winners. When the market rebounds, these three growth stocks all have strong potential to take off.
