The stock market is soaring and many growth stocks have benefited from this positive momentum. The S&P500 index confirmed the bull market earlier this year when it hit a record high – and has since hit new records.
Even after the gains, some of this year’s winning stocks still make great investments because they have further upside and their long-term prospects are bright. But it’s important to keep an eye on growth stocks that haven’t yet taken off, because this is where you can find some particularly good bargains.
These players have been left behind so far, but some have what it takes to move forward. I’m talking about the demand for their products or services, sales growth and smart management of their financial situation.
Two stocks in particular fall into this category and could skyrocket already this year – and continue to rise over time. Let’s take a look at them.
1. Carnival
Carnival (NYSE: CCL) (NYSE:CUK) struggled during the early pandemic when sailings were temporarily suspended. The long-profitable company made losses and its debts ballooned. But the world’s largest cruise line addressed its problems by streamlining its operations and cutting costs, and these efforts soon began to pay off.
Early last year, Carnival’s cash flow from operations and adjusted free cash flow turned positive, and importantly, this continued trend is helping the company pay down its debt. Speaking of debt, the company paid down $6 billion in debt last year, bringing debt levels down from their peak. Part of this payment included the early repayment of floating rate debt, an important step as it makes the company less vulnerable to periods of higher interest rates.
But Carnival’s recent successes aren’t just down to cost cutting and careful debt management. The company is also growing due to demand for its cruises, and this has been going on for several quarters. This is positive because it shows that this is not a short-lived trend, but one that indicates that long-term demand for cruises – including Carnival’s – is back.
In its most recent quarter, Carnival reported record first-quarter revenue of more than $5.4 billion, and booking volume reached an all-time high. In fact, this increase in bookings came against a backdrop of higher cruise prices, demonstrating the strength of demand for cruise vacations.
Meanwhile, Carnival shares haven’t yet reflected all this good news, and today they’re trading around their all-time lows relative to sales. This seems like a bargain considering the company’s recovery and growth over the past year and Carnival’s track record before the pandemic. So it’s a good time to get in on this growth stock that’s ready to make a splash.
2. Tough
Tough (NYSE: CHWY) is a favorite e-commerce destination of pet parents because here they can find virtually everything they need for their pets, from food and toys to health insurance and prescription medications. The company has become profitable in recent years thanks to these loyal fans who keep coming back and spending more.
One important thing to look at in Chewy’s earnings reports is the company’s Autoship numbers. This service automatically reorders your favorite items and ships them to your door, saving you time and ensuring you always have everything on hand for your pet.
Autoship represents more than 77% of Chewy’s net sales, demonstrating that these regular orders (rather than random, one-off orders) are driving the company’s growth. This is great because it gives us insight into future sales, with the idea that loyal customers generally keep coming back.
Additionally, Chewy has made some wise expansion decisions recently. The company has expanded its e-commerce platform to Canada. This was done without major costs thanks to the company’s existing infrastructure and software stack. And it opened its first in-person pet clinics, a move that will diversify its revenue base and bring greater exposure to the e-commerce store.
In other positive news, Chewy just announced its first-ever share buyback program, signaling that the company is optimistic about its future.
Right now, Chewy is trading at about 24x forward earnings estimates — a bargain, given the company’s recent growth and long-term prospects. That’s why now is a great time to get in on this exciting stock that could soar higher at any moment.
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Adria Cimino has no positions in the stocks mentioned. The Motley Fool has positions on and recommends Chewy. The Motley Fool recommends Carnival Corp. On. The Motley Fool has a disclosure policy.
2 Growth Stocks That Could Skyrocket in 2024 and Beyond Originally published by The Motley Fool
