It can be tough to buy a stock when its share price is soaring. As the stock gets more expensive, you must cough up more money to own a slice of the business. But there's normally a good reason why the stock's price is rising steadily, and it's usually tied to its business fundamentals.
Legendary investor Warren Buffett says that "if a business does well, the stock eventually follows." This simple statement contains some subtlety in that it's really saying that you should look at the business behind the stock because it's the success of the business that will drive its share price higher.
Once you understand this subtlety, it becomes clear how you ought to invest if you want to succeed in building your wealth. You want to focus on the solid growth stocks that represent businesses possessing catalysts or riding sustainable trends over years or even decades and can grow their revenue, profits, and cash flows over time. As business profits increase, investors will bid up the price of its shares, resulting in attractive capital gains. As the gains from these stocks multiply, you will eventually end up with a comfortable pot of money that you can draw on for your retirement.
Here are three stocks whose share prices have soared this year that are still worth buying now to attain long-term gains.
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1. Dutch Bros
Dutch Bros (BROS 2.70%) is an operator and franchisor of drive-thru coffee stores that serve high-quality, handcrafted beverages. As of March 31, the company had 876 locations across 17 states in the U.S. Dutch Bros saw its share price surge by nearly 333% year to date, and with a market capitalization of just $6.5 billion, there's plenty of room for further growth.
The coffee chain's financials saw a sharp improvement over the past three years. Revenue soared by 92% from 2021 to 2023, going from $497.9 million to $965.8 million. The business reported an operating income of $46.2 million for 2023, a far cry from the operating loss of $111.2 million in 2021. Even after deducting finance expenses of $32.3 million in 2023, Dutch Bros still eked out a small net income of $1.7 million, a turnaround from two consecutive years of net losses in 2021 and 2022.
Operating cash inflow also increased to $139.9 million for 2023, more than doubling from the prior year, but free cash flow remains elusive for now as the coffee chain spends available capital to open new stores.
NYSE: BROS
Key Data Points
Dutch Bros saw rapid store growth during these three years. Store count started at 441 at the beginning of 2021, but nearly doubled to 831 by the end of 2023. Systemwide same-store sales were also positive for all three years. This momentum has carried forward into the first quarter of 2024, with a total of 45 new shops opened across 14 states.
Revenue in Q1 rose 39% year over year to $275 million, with operating income at $25.6 million. Net income for the quarter stood at $7.1 million, already higher than the total net income for the whole of 2023. Operating cash flow catapulted from just $3 million the year before to more than $41 million for the quarter, demonstrating the business' strong cash flow generation capability.
With more people developing a taste for high-quality, artisanal coffee, Dutch Bros looks well-positioned to continue growing its presence as well as its top and bottom lines. The company plans to open between 150 to 165 new stores this year and expects positive same-store sales. With strong brand recognition from its member rewards program, along with two successful product launches during the most recent quarter, Dutch Bros looks like a stock you can keep for the long term.
2. Apple
Apple (AAPL +1.59%) is one of the "Magnificent Seven" stocks that helped push the Nasdaq Composite and S&P 500 to new records this year. The iPhone maker's stock is up nearly 18.4% year to date and breaking new all-time highs in the process. The company's financials remain solid, with revenue dipping just slightly to $210.3 billion in the first six months of fiscal 2024.
Net income for the first two quarters came in 6.3% higher year over year at $57.6 billion, and Apple also saw its Services revenue achieve a new record. Free cash flow increased slightly by 4.2% year over year to $58.2 billion, and the company also upped its quarterly dividend to $0.25, an increase of 4%.
NASDAQ: AAPL
Key Data Points
There could be more positive news to come as Apple launches Apple Intelligence, a new personal artificial intelligence (AI) system that will be incorporated into its iPhone, iMac, and iPad. Working with generative AI models, the company will integrate Apple Intelligence into its new iOS 18 operating system to help simplify tasks and make work more productive. With only the newer iPhone models able to handle the processing capabilities required of Apple Intelligence, Apple may see a big wave of device upgrades that will boost its sales figures.
The company's new spatial computing headset, the Apple Vision Pro, is also going on sale outside the U.S. in countries such as Singapore, mainland China, Hong Kong, and Japan. This cutting-edge piece of technology allows for immersive video watching and the ability to increase productivity by working with just your eyes and hands. Apple's innovation and strong customer loyalty are reasons enough to own the stock for years and even decades as it endears more customers to its suite of products and services.
3. Netflix
Netflix (NFLX +0.96%) is the market leader in streaming television. The company releases a wide selection of original movies, TV series, and documentaries for its members. Netflix's stock has risen by 42% year to date, and investors could see more upside over the years if the company continues delivering the same breadth and quality of content that it has over the past several years.
Netflix's financials are impressive -- revenue has increased from $29.7 billion in 2021 to $33.7 billion in 2023. Net income has grown from $5.1 billion to $5.4 billion over the same period, and the business is also churning out consistent positive free cash flow every year. The first quarter of 2024 saw revenue increasing by 14.8% year over year to $9.4 billion and net income surging by close to 79% year over year to $2.3 billion.
Netflix's membership base has also grown steadily over the years. Membership stood at 221.8 million at the end of 2021 and has grown by nearly 22% by Q1 2024 to 269.6 million.
NASDAQ: NFLX
Key Data Points
Netflix's share of overall TV viewership in almost every country is less than 10%, suggesting there are still ample opportunities for Netflix to broaden its content slate to attract more members. Many of the company's titles already have millions of views, and its Academy Award nominations for its in-house films have made it the most nominated studio for three out of the past four years.
Netflix has also started to phase out its cheapest ad-free $11.99 tier, even as it increases its ad-supported tiers across different countries. With slightly more than a quarter of a billion members, Netflix is betting that these customers will continue to pay higher prices to have access to its wide variety of different content. There are plans to introduce live shows for comedy, sports, and music, helping to take the entertainment level up another notch to keep its members satisfied.
With Netflix's strong market leadership and significant growth runway, along with its consistent spending on quality content, investors should continue to see healthy growth in profits and cash flows.
