Stocks have rallied this year, prompting some to even call a bull market. We're not there yet. Yes, the S&P 500 has climbed more than 20% from its bear market low. But it hasn't yet reached a new high. Both of those things must happen for the market to enter bull territory.
The good news, though, is the market is advancing -- and many stocks that struggled last year have taken off. And we know that bull markets always follow bear markets. So even companies that have been left behind in this rally could eventually join the party -- if they have solid long-term prospects. I can think of two great examples in the world of consumer goods right now. In fact, if I were you, I'd buy these two growth stocks before they skyrocket.
1. Chewy
Chewy (CHWY 2.99%) may be gaining momentum. The stock is little changed for the year -- after falling as much as 20% since January. It looks like investors are starting to applaud the company's earnings progress.
The online seller of pet supplies, virtual vet visits, and pet health insurance reached profitability last year. And Chewy continues to show growth across the board. In the first-quarter earnings report, net sales increased in the double digits. Basic and diluted earnings per share gained. And adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin reached a record 4%.
It's also important to look at Chewy's progress over time. The company increased annual revenue to $10 billion from $3.5 billion over the past four years. Today, Chewy has more than 20 million active customers -- and their average spending increased by 14% in the first quarter.
More growth is likely on the way for Chewy. That's because the company is expanding into its first international market later this year: Canada. Chewy's current infrastructure means it doesn't have to make a big initial investment. And Chewy expects the Canadian market to deliver growth on par with that of the U.S. So, this move could be significant for the company.
Today, Chewy trades for 66 times forward earnings estimates, lower than its average over the past two years. Considering the growth prospects ahead, Chewy makes a great buy at these levels.
CHWY P/E Ratio (Forward) data by YCharts.
2. Etsy
This year's rally has completely left Etsy (ETSY 0.34%) behind. The platform that brings together sellers and buyers of handmade goods has dropped 28% this year.
Here's why I'm not worried -- and think this stock will eventually soar. It's true that Etsy's revenue isn't climbing these days as it was earlier in the pandemic. Then, people favored e-commerce. And Etsy benefited.
But the positive element here is Etsy has kept the gains made during those times of high growth. For example, Etsy marketplace's gross merchandise sales in the first quarter totaled more than $2.7 billion -- that represents triple-digit growth from the same period four years ago. And active buyers also have increased in the triple digits during that time period to reach more than 89 million.
And, importantly, in the quarter, Etsy's number of active buyers grew for the first time since the fourth quarter of 2021. So, if this can happen in an environment of rising interest rates and general economic troubles, there's reason to be optimistic about how Etsy can perform in better times.
Finally, I like Etsy's capital-light business model. It means the company can transform most of its adjusted EBITDA into free cash flow.
All of this means that Etsy, trading for less than 20 times forward earnings estimates, looks dirt-cheap right now -- and could be getting ready for major gains down the road.
