Every investor can find monster winners in the stock market. The important thing to remember is that Wall Street can be slow to assign excellent growth stocks the valuation they deserve. But if you persistently buy shares of fast-growing companies, you’re almost guaranteed to stay ahead in the long run.
To help you jump-start your search, three Motley Fool contributors are here to discuss three growth stocks poised to deliver excellent returns for investors. This is why elf Beauty(NYSE: ELF), Toast(NYSE: TOST)And Deckers Outside(NYSE: DEK) could be a timely purchase right now.
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Jennifer Saibil (elf Beauty): Elf is a small player in the beauty industry compared to the industry giants, but is growing rapidly and gaining market share. More importantly, it offers enormous possibilities.
Social media and digital shopping play a major role in elf’s success. It has developed differentiated branding with ‘clean’ ingredients and great prices that resonates with its core target market of younger, environmentally conscious consumers. Customers can’t get enough of her products.
The results speak for themselves. The country gained 2.6 percentage points of market share in color cosmetics in the first fiscal quarter of 2025, while the market leaders all lost market share. It rose from No. 5 last year to No. 2 this year in dollar share. It is now the best-selling brand at Goal. In skin care, it gained 0.6 percentage points of market share, rising from number 13 to number 9. It is just getting started in international markets, where it is still being launched, and international sales increased year on year by 91% in the quarter.
Although Elf has been reporting staggering growth for several quarters, it appears that this is starting to weaken. Sales rose 50% year over year in the first quarter, but management expects this to decline to around 26% for the full year. That implies a serious slowdown in the next three quarters. Worse, net income was lower year-over-year in the first quarter, and management’s full-year earnings per share (EPS) expectations were lower than Wall Street expectations.
With declining inflation and an improving economy, this could turn out better than expected. But investors should focus on the long-term story. elf has a growing, differentiated brand that continues to challenge the old market leaders. elf stock is down 24% this year, and while it may take some time to recover, patient investors will be thanking themselves in a few years for buying today.
John Ballard (toast): Toast is a leading restaurant management software provider that has consistently delivered high double-digit revenue growth, and its stock prices have recently broken out to new highs. With Wall Street starting to give the stock its due, investors should expect excellent returns in the coming years.
Toast continues to see strong momentum for its offering. The total number of locations using the product grew 29% year-on-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 beats its competition in the restaurant software market with its easy-to-use platform and ability to innovate with new solutions. The tools help restaurants save time managing payroll, marketing and preparing orders. That’s why the number of restaurants using the platform has doubled since 2021.
Toast is in the early stages of growth and its shares continue to trade at an attractive valuation. Shares have a price-to-sales ratio of 3.8, which is on the low side for a software company. Wall Street could continue to bid the stock up for a higher valuation if the company continues to surprise positively with higher margins.
Jeremy Bowman (Deckers Outside): It may not be a household name, but Deckers Outdoor is one of the best-performing stocks in the apparel industry over the past five years.
Shares have risen nearly 600% in the past five years, driven by the breakout growth of Hoka, the popular running shoe brand, and the continued success of Ugg, its signature sheepskin boot.
Deckers’ strength was reflected in its recent second-quarter earnings report. Revenue rose 20% to $1.31 billion, and earnings per share rose 39% as margins expanded.
The Hoka brand continues to grow rapidly with revenue up 35%, an acceleration from the previous quarter to $570.9 million. However, Ugg is still the largest brand. The company also continues to deliver solid growth, with revenue up 13% to $689.9 million in the quarter.
In addition to the continued strong turnover growth, Deckers’ margins are also impressive. It posted a gross margin of 55.9% in the quarter, up from 53.4%. That is well ahead of the market leader Nike and comparable to high-end brands such as Lululemon Athletica And When holdingeven though Deckers is much more dependent on the wholesale channel than those two brands.
Its 23% operating margin over the last four quarters matches Lululemon’s and easily beats both Nike and On.
Deckers appears well priced for its growth rate with a price-to-earnings ratio of 30, and given 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 perform better in the coming years.
Consider the following before purchasing shares in elf Beauty:
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Jennifer Saibil has no positions in any of the stocks mentioned. Jeremy Bowman has positions in Nike and Target. John Ballard holds positions in Toast. The Motley Fool holds positions in and recommends Lululemon Athletica, Nike, Target, Toast and eleven Beauty. The Motley Fool recommends On Holding. The Motley Fool has a disclosure policy.
3 Hyper Growth Stocks That Can Make You Big Money was originally published by The Motley Fool
