2022 has been a difficult market to navigate for all kinds of investors. But amid the challenge, there is also the opportunity to take a stake in companies that exhibit the traits of great, long-term growth stories at steep discounts to where they were just a few months ago.
Here are three examples of growth stocks that are all trading at discounts of 60% or more from their 52-week highs that investors with a five-year-plus time horizon can buy now and hold for the long term.
Canada Goose (GOOS 4.48%) is down just over 60% from its 52-week high due to many of the same reasons as other stocks, including concerns about inflation and supply-chain disruptions, as well as China’s ongoing lockdowns. But Canada Goose is actually more insulated from supply-chain concerns than many of its peers, and when China eventually normalizes, Canada Goose has been positioning itself to capitalize on this major growth opportunity.
On the latest earnings call, CEO Dani Reiss touted the fact that the company is “uniquely insulated” from supply-chain challenges because 84% of the company’s manufacturing is done in Canada and that it hasn’t seen any major disruptions in terms of the supply chain.
As for China, Reiss says he does not expect the current situation to have a meaningful effect on Canada Goose’s results during the third quarter, which is traditionally the company’s busiest season when people are most actively shopping for winter coats. China is actually the market where Canada Goose has the largest physical presence, and the company views it as a major growth driver going forward.
In addition to these attributes, Canada Goose is also growing revenue and earnings at a solid clip, all at the inexpensive valuation of just 9 times forward earnings. The company expects to increase revenue from its record $ 1 billion in fiscal 2022 to between $ 1.3 billion and $ 1.4 billion next year, and to increase earnings per share by 47% or more.
Canada Goose also boasts very solid gross margins of 67%, showing that it has pricing power and a differentiated product for which consumers are willing to spend more.
fangs (CROX 4.68%) has declined more than Canada Goose, trading 71% below its 52-week high. And Crocs is even cheaper than Canada Goose, trading at under five times this year’s earnings and just below 4.5 times forward earnings. This is a company that grew revenue by 47% year over year for the first quarter of 2022. While the past few months have been difficult, management has a sterling track record, creating tremendous value for shareholders over time. The stock has gained more than 700% over the past five years.
The company is set up well for the long term with members of Gen Z ranking it as their sixth-favorite brand, and the standard adult clog and kid’s clog ranking as the third and eighth best-selling products on Amazon, respectively, at the time of this writing. The company’s recent acquisition, Hey Dude, claims all five of the top five spots for bestsellers in the men’s slip-on and loafer category on Amazon. Management’s goal is to grow Crocs to a $5 billion or more brand in revenue by 2026, a number that far exceeds the entire company’s current market cap of $3.3 billion.
Last but not least, Figs (FIGs 5.08%) is another high-growth stock that has been knocked down by current market conditions. Figs has fallen more than Canada Goose and Crocs – off 80% from its 52-week high. The stock was one of last year’s hottest IPOs but has not fared well as of late.
But Figs is not just a flash in the pan. The company makes stylish, colorful apparel for healthcare workers. It has a differentiated, high-performance product for which consumers are willing to spend more, as evidenced by its impressive 70% gross margins. The company boasts a net promoter score of over 80 and is expanding its offerings, such as lifestyle apparel and footwear (via a collaboration with New Balance).
While the stock sold off after earnings because revenue growth was slower than expected, the company grew revenue by 26% year over year, which is still impressive in the current environment but lower than analyst expectations.
In the current market environment, a small miss like this is enough to create a massive pullback. But for the long-term-oriented investor, this looks like a good opportunity to buy shares of a company with high margins and a loyal and passionate following at an early stage of its growth story.