The stock market dealt investors a volatile hand lately, but companies with durable underlying businesses and growth stories continue to make themselves known. Share prices of stocks can tell you what investors think of that company at any given moment. But it's always important to look beyond factors like whether the stock has soared or declined in recent months to see what the business is doing and whether it aligns with your portfolio objectives.
If you have $1,000 available to invest that isn't needed to pay bills, boost an emergency fund, or get rid of short-term debt, here are two growth stocks to consider putting part or all of that amount into at your earliest opportunity.
1. Green Thumb Industries
Green Thumb Industries (GTBIF -4.33%) is a cannabis multi-state operator (MSO) and retailer with a footprint that currently spans 15 U.S. states and counting, and operates 77 different retail locations. The company sells products for both recreational and medical use, ranging from lotions and drops to edibles and pre-rolls.
The company's focus on the more regulated, legalized side of the cannabis industry (medical use) as well as the growing adult-use market has created a business with a history of steady revenue growth and profitability, elements that are not a given in the volatile marijuana space. For 2022, Green Thumb Industries reported revenue of $1 billion, a 14% jump from 2021 totals. Moreover, the company generated earnings of $12 million in the year as well as cash flow from operations in the amount of $159 million. It closed out the 12-month period with $178 million in liquidity on its balance sheet.
The impact of the macroeconomic environment has had varied effects on a wide variety of industries, and the marijuana space has been no exception. Moreover, while some progress has been made at the state level, many cannabis growers and retailers have had to deal with downward pressure on product prices. This is due to oversupply because lagging adult-use legislation and minimal progress on the federal level failed to spur the sales boom many operators had hoped for. Green Thumb Industries has so far navigated this economic environment far better than its peers, given its growing cash supply, cash generation, consistent revenue increases, and profitability on an annual basis.
While pot stocks in general remain a risky place to invest cash, for those with the fortitude to put capital into this space, Green Thumb is one of the few companies that has a favorable financial foundation and track record paired with a wide industry footprint to help carry it through continued turbulent waters. That could make the stock worth even a modest position for investors with a well-diversified portfolio.
2. Chewy
Chewy (CHWY 0.19%) operates in a far less volatile industry than the previous pick on today's list. Its leadership in the growing pet care space remains a core competitive advantage upon which it can generate future growth and profits. The company is more than just an online pet food store; it has a collection of products and services that range from a pharmacy that dispenses both generic and compounded medications to a growing selection of pet health insurance plans to its own line of pet supplements.
Core to the success of any business selling physical products in today's competitive environment is a smooth fulfillment system, and this is an area where Chewy continues to prove its ability to excel while slashing operating costs in the process. It's doing this by building out its network of automated fulfillment centers, which not only reduce overhead costs but can enable faster and smoother delivery periods for the customers ordering from Chewy's website. In fact, the company is leaning so heavily into its automated fulfillment network that it's closing two of its oldest, non-automated fulfillment centers and plans to open a fourth automated one in the next few months.
As for the financial impact this is having, the proof as they say, is in the pudding. In the company's 2022 earnings call, CFO Mario Marte noted, "Our variable fulfillment costs declined as a result of productivity gains and continued volume shift into our automated facilities, which collectively drove a 13% year-over-year reduction in systemwide variable fulfillment cost per order." Looking back at the full-year 2022, Chewy generated net sales of $10 billion, up 13% from 2021, while delivering earnings and free cash flow of $50 million and $120 million, respectively, during the 12-month period.
While pet spending by households can certainly fluctuate, particularly in a recessionary environment, this kind of expenditure is not really discretionary. The rise of pet ownership and the variety of needs that generates -- from pet food to supplies to medicine -- are all areas that Chewy's business is targeting. This creates an opportunity for the business to continue to expand its footprint in the years ahead, and investors who stay with the growth stock for the long haul can benefit from this upward trajectory as well.
