The S&P500 The index has averaged 10% annualized returns over the past half century, but it’s not that difficult to exceed that target if you invest in a group of well-chosen growth stocks.
To give you some ideas, a team of Motley Fool contributors see promising prospects fairy beauty (NYSE: ELF), Dutch Brothers (NYSE: BROS)And Celsius companies (NASDAQ: CELH). This is why these stocks should deliver superior returns.
This is one of the fastest growing consumer brands
John Ballard (elf Beauty): Eleven Beauty shares are up 275% in the past three years. The company’s focus on delivering value in color cosmetics has enabled the company to gain significant market share against the industry leaders. The company still has huge growth potential globally, but investors can buy the shares at a more reasonable valuation, with shares down more than 50% from their February high.
High inflation strengthened Elf’s value proposition. In the first fiscal quarter of 2025 ending June 30, revenue rose 50% from the prior year quarter. It is now the second mass market brand in the US, with a 12% market share, and management is working to expand the brand globally. International sales represent just 16% of sales, but grew by an impressive 91% year-on-year last quarter.
elf Beauty has promising growth potential and management sees value in the stock following the sell-off. The company recently announced a $500 million share buyback program. The stock has fallen on expectations that higher marketing investments will weigh on profits and margins in the short term. However, profits are still expected to rise 10% this year, before accelerating to 26% in the 2026 financial year.
Given the huge runway in international markets, the stock should outperform the broader market over the next five years and beyond.
Great coffee, growing sales
Jennifer Saibil (Dutch brothers): How do you open a chain of restaurants that basically sell coffee, but create a message that is distinctive enough to stand out? Starbucks and gain a huge following? Ask Dutch Bros. This small, down-to-earth coffee chain is expanding rapidly, generating high revenue growth and developing a growing base of loyal fans.
Dutch Bros has been around for decades as a small, local coffee shop chain in Oregon. After sharpening its image and culture and developing a range of popular drinks, it became a publicly traded company with big growth plans. It has for now successfully entered the new states on the West Coast and especially in the southern states, growing from a total of 415 stores in 2020 to 912 at the end of the second quarter. It opened 159 stores in 2023 and is targeting a possibility of 4,000 stores in the next 10 to 15 years, a target that implies accelerated expansion.
With new stores comes higher turnover. Sales growth was strong and stable, reaching 30% year-on-year in the second quarter. With higher sales and more efficient operations comes profits, and growing net income is reported.
An important new development is digital ordering. Despite the apparent need for everyone to go digital these days, Dutch Bros has achieved great success even without digitalization. However, now it has tested mobile ordering in some of its stores and it will go live by the end of the year. That sets the stage for further success. With its popular drinks and culture, new stores and digital launch, Dutch Bros should easily be able to maintain strong growth for the foreseeable future.
Dutch Bros stock is up 38% in the past year, outperforming the market, and it could be a market-killing stock for the next five years and more.
This drinks stock has more upside potential
Jeremy Bowman (Celsius Holdings): Celsius Holdings was one of the biggest breakout stocks of the pandemic, soaring after the energy drink caught fire Amazon during the lockdown period.
Starting in early 2020, shares gained more than 5,000% at one point before falling sharply in recent months on concerns about slowing growth, a maturing energy drink category and news that Pepsico too much inventory from Celsius, meaning it overestimated demand after it became a distribution partner.
Celsius stock is now down nearly 70% from its peak this year, but that offers investors a good buying opportunity. While the days of triple-digit percentage gains are likely over for the company, the growth story is far from dead and the stock now looks reasonably priced with a price-to-earnings ratio of 31.
In the second quarter, revenue increased 23% to $402 million, and gross margin continued to improve, up 320 basis points to 52%, demonstrating that the company is becoming increasingly efficient and benefiting from freight optimization and lower material costs.
Although there are signs that growth in the overall energy drink category as a market leader is slowing Monstrous drink reported just 6% growth at steady flow in the second quarter, Celsius continues to gain market share, with its retail dollar share rising 1.4 percentage points to 11% in the second quarter, while growth remains strong at the warehouse club and on Amazon.
The result is that Celsius appears oversold after the recent pullback. Investors can benefit from this as the company still has a promising growth trajectory ahead of it.
Should you invest $1,000 in Elf Beauty now?
Consider the following before purchasing shares in elf Beauty:
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jennifer Saibil has no positions in any of the stocks mentioned. Jeremy Bowman has positions in Amazon and Starbucks. John Ballard has positions in Dutch Bros. The Motley Fool holds positions in and recommends Amazon, Celsius, Monster Beverage, Starbucks and elf Beauty. The Motley Fool recommends Dutch Bros. The Motley Fool on. The Motley Fool has a disclosure policy.
3 Monster Stocks That Could Crush the S&P 500 in the Next Five Years Originally published by The Motley Fool
