After a brutal year for the markets, the growth-heavy Nasdaq Composite is up 14% year to date. Buying growing companies when they are on sale is a great way to boost your returns, but even as the markets rebound, there are still plenty of growth stocks worth buying right now.
Here's why you shouldn't hesitate to add shares of Chipotle Mexican Grill (CMG +1.28%) and Five Below (FIVE +3.29%) to your nest egg today.
NYSE: CMG
Key Data Points
1. Chipotle Mexican Grill
Chipotle has delivered market-crushing returns over the last decade, and not even a pandemic was able to knock it off course. Coming off another strong year of operating performance, the stock is already up 18% year to date in 2023. That's on top of nearly doubling in value over the last three years, and the stock could be heading toward new highs soon enough. There are a few reasons to consider adding this growth restaurant stock to your nest egg.
"Food with integrity" has been the company's calling card, and that marketing message continues to resonate. Despite the high-inflation environment that sent commodity prices higher for avocados, beef, and chicken, Chipotle reported stellar growth for the fourth quarter of 2022. For the full year, revenue and adjusted earnings per share grew 14% and 29%, respectively.
Data by YCharts
Chipotle's focus on quality and efficient service is not only driving excellent restaurant-level economics, but it's cementing its brand in a competitive industry. It has a growing following on social media, and management continues to invest in pushing its digital advantages, which currently make up 39% of sales.
The company recently started testing a location-based technology that can enhance the customer experience, such as sending an alert message when a customer arrives at the wrong pickup location and reminders to scan their reward code at checkout.
Chipotle still has plenty of room for expansion, as noted by its current growth rate and the opening of 236 new restaurants last year, bringing its total global footprint to nearly 3,200. That is a fraction of the tens of thousands of locations operated by Chipotle's former owner McDonald's. This growth runway should make for happy returns over the next decade.
NASDAQ: FIVE
Key Data Points
2. Five Below
Another fast-growing company to consider is Five Below. As its name suggests, Five Below focuses on the high-value end of the retail spectrum. It sells products across a range of categories aimed at teenagers and kids, including sports, candy, toys, and tech products. It's able to source quality products at cheap prices, which attracts customers of all income levels and generates a steady stream of growing revenue and profits to fund more store openings around the U.S.
Five Below currently has over 1,300 stores in 42 states. It just opened its first stores in North and South Dakota, but management sees the potential to open as many as three times that number over the long term.
While comparable store sales weakened last year, Five Below has delivered tremendous growth in profits over the last decade. This is a result of profitable store-level economics, where new stores earn back the initial investment in less than a year.
Data by YCharts
The company is currently rolling out the new Five Beyond format -- an effort to expand its value proposition to items above the $5 price point. The positive customer response with these newer stores is evidence of the long runway of growth ahead.
Five Below's stock price has tripled over the last five years, but it could certainly double again. The company's wide customer demographic and ability to expand into higher-priced merchandise suggest that it can maintain high growth rates longer than what's implied in the stock's valuation right now.
