Not all growth stocks are created equal. However, great businesses that deliver products and/or services with durable uses for their target consumers and have a compelling runway ahead can deliver enviable returns through the years. If you're looking for top growth stocks for scooping up in the early part of this year, here are two names to consider.
1. Intuitive Surgical
Intuitive Surgical (ISRG +2.81%) has built a booming business around its family of robotic surgical systems, which are used in a wide range of minimally invasive procedures across a variety of medical specialties.
Its various models of its flagship da Vinci system are commonly used in procedures including colon and rectal operations, bariatric surgeries, and hernia repairs, among many others. It also has a system called the Ion that is used specifically in minimally invasive lung biopsies.
Over the past five years, Intuitive Surgical has grown its annual revenue by 60%, while its annual profits have risen by 30%. The company has a reliable business model based primarily on recurring revenue streams.
Its systems run anywhere from $500,000 to $2.5 million when purchased via a traditional sale or sales-type lease. The company also offers its clients customized financing options such as operational leases that are billed on a usage or fixed basis.
But Intuitive makes more money through the recurring revenue derived from replacement instruments and accessories it sells to go with these systems than from sales or leases of the systems themselves.
NASDAQ: ISRG
Key Data Points
Instruments can have a usable life of anywhere from 12 to 18 procedures before they need to be replaced. So Intuitive's customers, such as hospitals or other medical providers, need to order new instruments on a regular basis.
This means that the company makes anywhere from $600 to $3,500 in revenue from sales of instruments and accessories per procedure. It also makes money from various services it offers its customers, like training, software, analytics tools, field service, and technical support from engineers trained for its systems.
Intuitive Surgical ended 2023 with 8,606 of its da Vinci systems installed globally, a 14% increase from one year ago. It also brought in trailing-12-month revenue of $7.1 billion, with profits totaling $1.8 billion for the period. The final quarter of the year saw da Vinci procedures jump 21% from one year ago.
Investors looking to gain exposure to the healthcare industry should focus on stellar businesses that face a considerably bigger addressable market, and that have resilient financial models. Intuitive Surgical looks like a no-brainer choice for a buy-and-hold stock that meets these parameters.
2. Etsy
For some time now, Etsy (ETSY 3.93%) hasn't reported the growth figures that investors became accustomed to during the height of the pandemic. But remember that this current period of moderated growth is in comparison to the rush of consumer spending during the worst of the pandemic. Ongoing fluctuations in discretionary spending in a challenging economy have also been a factor.
These factors are largely beyond Etsy's control and have plagued most businesses with exposure to non-essential spending. But management has enacted multiple changes for greater operational efficiency. These include workforce restructuring and the sale of one of its pandemic-era acquisitions, Elo7.
Over the trailing 12 months, Etsy has profits of about $334 million on revenue of around $2.7 billion. The third quarter of 2023 also saw a new high in active buyers on its flagship platform: 92 million, a 4% increase from one year ago.
NYSE: ETSY
Key Data Points
Of that active buyer total, 7 million are categorized as habitual buyers, a 200% increase on a four-year basis. Habitual shoppers are individuals who spend $200 or more on Etsy on six or more purchase days in a 12-month period.
Etsy also reported that it had 36.6 million repeat buyers on its marketplace as of the third quarter of 2023, a 133% increase from four years ago. In other words, about 8% of all shoppers on Etsy fit into the category of a habitual shopper, while about 40% of shoppers are repeat buyers.
In an economy where wallets are constrained, customers might be more drawn to some of the platform's products that are secondhand, vintage, or handmade -- and perhaps more affordable than products at a larger retailer.
Etsy is working on improving its financials, and it still has penetrated just a fraction (around 2.5% at last count) of its massive total addressable market. There's plenty of room for this stock to run, and patient investors could be rewarded in the years to come.
