It’s impossible to time the stock market and predict the end of the current bear cycle. While most indices have staged a turnaround in 2023, after a tumultuous last year, there is a good chance equities will move lower once again in the near term.
However, the ongoing volatility still allows investors to buy stocks at a discount and benefit from outsized gains once a bull market eventually returns.
Here are two such spectacular growth stocks you can buy now and hold forever.
Lululemon Athletica stock
Valued at a market cap of US$47 billion, Lululemon Athletica (NASDAQGS:LULU) stock is down 22% from all-time highs. While the Canada-based athleisure stalwart has trailed the broader markets in recent months, LULU stock is up a whopping 441% in the last 10 years.
In Q4 of fiscal 2022 (ended in January), Lululemon reported revenue of US$2.8 billion, an increase of 30% compared to the year-ago period. It was the tenth consecutive quarter in which company sales rose by at least 22% compared to the prior-year quarter, indicating a strong brand presence.
Its sales growth in recent quarters is quite enticing given Lululemon has wrestled with inflation, supply chain disruptions, the COVID-19 pandemic, and rising interest rates. In addition to stellar product demand, Lululemon ended Q4 with an operating margin of 28.3%. Its adjusted earnings also surged by 31% year over year to US$4.4 per share.
Priced at 32 times forward earnings, LULU stock is forecast to increase the bottom line by 16% annually in the next five years. Additionally, Lululemon ended fiscal 2022 with more than US$1 billion in cash and a debt-free balance sheet. This cash chest allows the profitable growth stock to pursue organic growth opportunities, as well as highly accretive acquisitions.
In April 2022, Lululemon announced its intention to double sales between fiscal 2021 and fiscal 2026. Given its stellar growth rates, it remains on track to end fiscal 2026 with US$12.5 billion in sales. If LULU stock continues to trade at a similar price-to-sales ratio, it should return over 50% to shareholders in the next three years.
Payfare stock
A fintech company that offers instant payout and digital banking solutions for gig or freelance workers, Payfare (TSX: PAY) is valued at a market cap of $334 million. Payfare has already onboarded one million users to date increasing its sales from just $6 million in 2019 to $130 million in 2022.
Payfare recently announced its intention to expand into the EWA (Earned Wage Access) market. The company explained, “The opportunity ahead is significant, with a total addressable market (TAM) in the United States of over 131 million people earning less than $75K annually, over 78 million hourly wage workers, and 12 million people drawing on payday loans once a year. In Canada, over 22 million people earn under $75K annually.”
Personal budget shortfalls have been cited as an important issue as 44% of workers have less than $500 saved for emergency expenses on essential items including gas, rent, and groceries.
PayFare’s sales are forecast to touch $244 million while adjusted earnings might expand to $0.63 per share by 2024. Priced at 1.4 times forward sales and 11 times forward earnings, PAY stock is trading at a discount of 75% given consensus price target estimates.
