Buying leading businesses within large and growing industries often works out well for investors if given enough time. That's because these factors can't help but push revenue and earnings higher, resulting in outsize investment returns.
Let's highlight two consumer-oriented stocks, both of which have made their shareholders much richer in the past five years, that growth investors should consider buying for their portfolios.
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1. Chipotle: An encouraging growth outlook
Since opening its first store in 1993, Chipotle Mexican Grill (CMG 2.41%) has enjoyed immense success. In the last five years alone, the company's restaurant count has grown from over 2,400 restaurants on March 31, 2018, to more than 3,200 restaurants as of March 31, 2023 -- mostly in North America and, to a lesser extent, Europe.
This explains how a $10,000 investment made in Chipotle just five years ago would now be valued at $46,000. By comparison, that is far above the $18,000 that the same investment made in the S&P 500 index would now be worth with dividends reinvested.
And as big as the company is at this time, Chipotle still has growth left in its future. For one, the Mexican fast-casual restaurant operator announced it added the international franchise retailer operator Alshaya Group as its first and only franchise partner. Together, the two companies will be opening restaurants in Dubai and Kuwait in early 2024 -- expanding to its third continent.
And since Chipotle didn't close any restaurants in the fourth quarter of 2022 or the first quarter of 2023, there is reason to believe the company isn't done growing in North America, either. This is why Chipotle has a long-term target of 7,000 locations on the continent. Along with its base of 33 million loyalty rewards members as of March 31, that explains how analysts think the company's earnings will rise by 25.2% annually over the next five years.
Trading at a forward price-to-earnings (P/E) ratio of 38.9 versus the restaurants industry average forward P/E ratio of 25, Chipotle stock isn't cheap. But with its annual earnings growth prospects coming in well above the industry average of 14.5%, this premium valuation looks fair.
2. Lowe's: The future is bright despite a bump in the road
It's often said that a person's home is their castle. With so many consumers willing to spend on home renovations to fit their living preferences, this expression seems to hold true. That also explains how a $10,000 investment in home improvement retailer Lowe's (LOW -0.04%) made five years ago would now be worth $25,000 with dividends reinvested.
By now, it's well-known that the company is going to take a hit in its fiscal year 2024, ending in January: Analysts project that sales will dip by 9.2% over the previous fiscal year to $88.2 billion for the current fiscal year. This is because a surge in home prices in recent years, coupled with high interest rates, has priced home renovations out of the budgets of some consumers.
But as home prices and interest rates eventually cool, Lowe's should be able to return to growth mode. That is why analysts believe the company's earnings will compound by 6.4% annually over the next five years.
Combined with a dividend payout ratio poised to clock in at approximately 32% in fiscal year 2024, Lowe's should have no problem handing out dividend increases moving forward. And income investors can pick up its 1.9% dividend yield at a forward P/E ratio of 16.1 -- less than the home improvement retail industry average forward P/E ratio of 19.1.
