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3 Growth Stocks for Your Roth IRA

By Nicole Seghetti - Updated Feb 14, 2017 at 4:46PM

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Time is running out for funding a Roth IRA. Here's why it's important and what stocks to consider for your Roth.

With one month left before the tax-filing deadline, it's time to fund that all-important Roth IRA if you haven't done so already. Let's briefly look at why a Roth IRA is so essential in saving for your retirement. Then we'll discuss three great growth stocks for your Roth.

Without a doubt, the best way to save for retirement is a Roth IRA. You contribute after-tax dollars to a Roth in exchange for tax- and penalty-free earnings. If you've not made your contribution for 2013, you have until the April 15 tax-filing deadline to do so. But before contributing, be sure to familiarize yourself with Roth IRA rules and eligibility requirements.

Stocks for the growth investor
For investors yearning for growth, I've narrowed the stock universe down to three great companies, all boasting competitive positions and enticing growth prospects.

Ulta Beauty ( ULTA -1.26% ) offers a vast number of beauty products and salon services under one roof. The Illinois-based company also gives customers the ability to shop for high-end products in a low-pressure environment with the help of noncommissioned sales associates. These competitive advantages  have led to revenue and earnings growth and same-store sales gains. Over the past three years, Ulta's revenue has averaged annual growth of 20%, while earnings have averaged 38%. Going forward, Ulta is focused on growing domestically, expanding its product and service offerings, enhancing its loyalty programs, and improving margins. The company's recent P/E ratio has been around 29, while its five-year average P/E is close to 36. Ulta's forward-looking P/E, based on next year's earnings, is 23. Its stock currently trades more than 30% off its 52-week high.

Chipotle Mexican Grill ( CMG -1.20% ) has built its reputation on providing fresh, high-quality fast-casual food. In 2012, Chipotle grew revenues 20% and saw same-store sales growth of over 7%. Despite the company's savory success (its stock is up more than 130% in the past three years), its growth story isn't over. With less than two dozen international locations, Chipotle has huge overseas growth opportunities. Chipotle's ShopHouse and Pizzeria Locale restaurant concepts also house a great deal of potential. Currently, these restaurants have only a few locations, indicating lots of room to grow. Over the past three years, Chipotle's revenue has averaged annual growth of 21%, while earnings have averaged 24%.  

Google ( GOOGL -0.68% ) currently generates the overwhelming majority of its revenue from search advertising. In fact, Google generated about 85% of its nearly $60 billion of revenue from ads in 2013. But the California-based company is broadening beyond its core search platform by actively diversifying its business. Its YouTube acquisition, Android mobile software, Google Ad Exchange, Google+ social network, and Chrome browser services are evidence of this. Over the past three years, Google's revenue has averaged annual growth of 27%, while earnings have averaged 13%. Continued innovation beyond search and acquisitions will likely drive future growth for Google.

Take action today
Don't let the upcoming Roth IRA contribution deadline slip past you. Consider these three attractive growth stocks for your contribution dollars today. Take the time to fund a Roth IRA and secure your financial future. Years from now, you'll be glad you did.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Alphabet Inc. Stock Quote
Alphabet Inc.
$2,840.03 (-0.68%) $-19.29
Chipotle Mexican Grill, Inc. Stock Quote
Chipotle Mexican Grill, Inc.
$1,592.10 (-1.20%) $-19.34
Ulta Beauty, Inc. Stock Quote
Ulta Beauty, Inc.
$378.81 (-1.26%) $-4.83

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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