Any investor can find monster winners in the stock market. The important thing to remember is that Wall Street can be slow to award excellent growth stocks the valuation they deserve. But if you persistently buy shares of high-growth businesses, you are almost certain to stay ahead of the game over the long run.
To give you a jump-start on your search, three Motley Fool contributors are here to discuss three growth stocks that are poised to deliver outstanding returns to investors. Here's why e.l.f. Beauty (ELF +0.81%), Toast (TOST +6.99%), and Deckers Outdoor (DECK +0.26%) could be timely buys right now.
The new leader in an old industry
Jennifer Saibil (e.l.f. Beauty): E.l.f. is a small player in the beauty industry compared to the industry giants, but it's growing fast and gaining market share. More importantly, it has massive opportunities.
NYSE: ELF
Key Data Points
Social media and digital shopping play a big role in e.l.f.'s success. It has developed a differentiated branding with "clean" ingredients and great prices that resonates with its core, target market of younger, eco-conscious shoppers. Customers can't get enough of its products.
The results speak for themselves. It gained 2.6 percentage points of market share in color cosmetics in the 2025 fiscal first quarter while the market leaders all lost share, and it moved up from the No. 5 spot last year to the No. 2 spot this year in dollar share. It's now the top-selling brand at Target. In skincare, it gained 0.6 percentage points in market share, moving up from No. 13 to No. 9. It's just getting started in international markets, where it continues to launch, and international sales increased 91% year over year in the quarter.
Although e.l.f. has reported staggering growth for several quarters, it looks like that's beginning to weaken. Sales increased 50% year over year in Q1, but management is expecting that to drop to about 26% for the full year. That implies a serious deceleration over the next three quarters. Worse, net income was lower year over year in Q1, and management's guiding for full-year earnings per share (EPS) below Wall Street's expectations.
With moderating inflation and the economy on the upswing, that could end up better than expected. But investors should focus on the long-term story. e.l.f. has a growing, differentiated brand that continues to eat away at the longtime industry leaders. e.l.f. stock is down 24% this year, and although it might take some time to rebound, in a few years patient investors will thank themselves for buying today.
An undervalued software stock
John Ballard (Toast): Toast is a leading restaurant management software provider that has consistently delivered high double-digit revenue growth, and the stock just recently broke out to new highs. With Wall Street starting to give the stock its due reward, investors could be looking at excellent returns over the next few years.
NYSE: TOST
Key Data Points
Toast continues to see strong momentum for its offering. The total number of locations using its product grew 29% year over year in the second quarter, bringing the total to 120,000. This drove a similar increase in gross payment volume and revenue, and importantly, the company is starting to see growing net income.
Toast is beating its competition in the restaurant software market with its easy-to-use platform and ability to innovate with new solutions. Its tools help restaurants save time managing payroll, marketing, and preparing orders. It's why the number of restaurants using the platform has doubled since 2021.
Toast is in the early innings of growth, and its stock still trades at an attractive valuation. Shares fetch a price-to-sales ratio of 3.8, which is on the low side for a software business. Wall Street may continue to bid the shares up to a higher valuation if the company continues to surprise to the upside with higher margins.
This footwear specialist keeps moving higher
Jeremy Bowman (Deckers Outdoor): It might not be a household name, but Deckers Outdoor is one of the best-performing stocks in the apparel industry over the last five years.
NYSE: DECK
Key Data Points
Shares are up nearly 600% in the last five years, driven by the breakout growth of Hoka, the popular running shoe brand, and the continuing success of Ugg, its trademark sheepskin boot.
Deckers' strength was on display in its recent fiscal Q2 earnings report. Revenue jumped 20% to $1.31 billion, and earnings per share jumped 39% as its margin expanded.
The Hoka brand continues to grow rapidly with revenue up 35%, accelerating from the previous quarter to $570.9 million. However, Ugg is still its largest brand. It continues to deliver solid growth as well, with sales up 13% to $689.9 million in the quarter.
In addition to the consistently strong top-line growth, Deckers' margins are also impressive. It posted a gross margin of 55.9% in the quarter, up from 53.4%. That's well ahead of industry leader Nike and on par with high-end brands like Lululemon Athletica and On Holding, even though Deckers is much more reliant on the wholesale channel than those two brands.
Its operating margin of 23% over the last four quarters matches that of Lululemon and easily beats both Nike and On.
Deckers looks well-priced for its growth rate at a price-to-earnings ratio of 30, and considering its success with both Hoka and Ugg, the company has the potential to add a third breakout brand to its portfolio in the future. Expect Deckers to continue to outperform in the coming years.
