Being a long-term investor isn't always easy, as you'll inevitably encounter downturns as well as the thriving bull periods that occur in a cyclical market. However, this is a far better alternative to attempting to time the market, a strategy that rarely works (and even when it does, rarely works consistently).
If you are looking to invest in top growth stocks, these companies can experience more volatility than the average stock. However, these stocks can also deliver generous returns in times of strong market sentiment if backed up by a quality business that has the ability to grow over the long term.
Here are two top growth stocks to consider buying right now.
1. Eli Lilly
Eli Lilly (NYSE: LLY) has been in the limelight more frequently of late, with the success of its glucagon-like peptide-1 (GLP-1) drugs that have reinvigorated growth for one of the oldest pharmaceutical companies around. The company has a superior track record of profitability and revenue growth, despite the maturity of its business.
Over the trailing decade, Eli Lilly's annual profitability has soared by approximately 118%, while its top line has grown by approximately 71% in that same time frame. The company has also proven to be a faithful income source for long-term income investors.
As of now, the company's annual dividend stands at $6 per share, with a yield of approximately 0.75%. That yield is on the lower end, which makes sense for a stock that has performed as well as it has of late. Eli Lilly also maintains a favorable payout ratio of approximately 54% and has raised its dividend every year for over a decade at the time of this article. However, Eli Lilly paid its first dividend back in the 19th century.
Eli Lilly's GLP-1 drugs, Mounjaro (for diabetes) and Zepbound (for weight loss), are far from the only growth drivers in its portfolio. Even as the regulatory and reimbursement landscape for GLP-1 drugs evolves, the company has a broad portfolio of other successful drugs in disease areas ranging from immunology to oncology. These include drugs like Verzenio, Trulicity, Jardiance, Taltz, Humalog, Cyramza, and Olumiant.
Recently, Eli Lilly garnered approval for Kisunla, a treatment for early symptomatic Alzheimer's disease. The Food and Drug Administration (FDA) also approved Ebglyss, a first-line biologic for the treatment of adults and children 12 years of age or older with moderate to severe atopic dermatitis.
Then, in January, the FDA approved the company's drug Omvoh for Crohn's disease. The drug was first approved in October 2023 for patients with moderately to severely active ulcerative colitis, meaning it is now approved in the U.S. for two major types of inflammatory bowel disease. Omvoh is designed to slash inflammation in the gastrointestinal tract by targeting a specific protein that is one of the underlying factors in intestinal inflammation.
Among other newly approved drugs, Eli Lilly expects that Kisunla, Ebglyss, and Omvoh will be major growth drivers for its portfolio in 2025. In mid-January, Eli Lilly released preliminary revenue estimates for its full year 2024. Management noted that while revenue was expected to be approximately 3% below previous guidance, the company's top line was still expected to increase 32% compared to the full year 2023, totaling $45 billion.
Looking at the first nine months of 2024, Eli Lilly reported total revenue of about $32 billion, up 27% compared to the same time frame in 2023. It also generated net income of approximately $6.2 billion in that nine-month period, roughly double its profits according to generally accepted accounting principles (GAAP) one year prior.
Booming demand for Eli Lilly's newer portfolio additions plus its flagship portfolio of drugs can help drive this profit and dividend powerhouse forward into its next era of growth. Investors who stay with the stock for the next decade and beyond can reap those long-term rewards.
2. Chewy
Chewy(NYSE: CHWY) is known for its pet e-commerce platform, where it sells everything from food to toys to bedding to medicine for pets, along with supplies for certain farm animals. Right now, Chewy's primary source of revenue and income is selling these core pet products through its e-commerce business. However, management is targeting numerous revenue sources that they hope to build out over the long run as Chewy evolves into the next stage of its growth story.
Currently, Chewy's primary business model revolves its Autoship business, its subscription-based recurring revenue segment. Through Autoship, pet owners can set up recurring deliveries of their favorite food, treats, toys, and pet care items. In the third quarter of 2024, Chewy's Autoship sales represented 80% of its entire net sales in the three-month period. That figure reached $2.3 billion, a 9% increase compared to the third quarter of 2023.
While Chewy was a pandemic darling, some investors seem to have soured on the stock the last few years as those years of elevated pet spending have waned and consumers are more cautious with spending than in past economic periods. However, Chewy is demonstrating its resilience and value proposition for pet owners, factors enabling its continued revenue growth and profitability.
Not only do most of Chewy's sales come from recurring deliveries that its customers set up, but the majority of its top line is also derived from non-discretionary purchases. In the third quarter of 2024, non-discretionary categories like consumables and healthcare products accounted for 85% of net sales. Chewy also grew its cohort of active customers by 160,000 individuals sequentially, ending the three-month period with 20.2 million active customers.
Now, let's look at newer and future sources of revenue growth for Chewy's business. The company has other pet-centric businesses besides its flagship e-commerce offering, including an online pet pharmacy, pet telehealth services, and pet health insurance plans. It recently launched a sponsored ad program, which allows select brands that sell on its platform to advertise to Chewy shoppers. Even though it's early days for this program, management expects this initiative will comprise 1% to 3% of net sales in fiscal 2024.
Another major change for Chewy has been management's decision to expand into brick-and-mortar business, opening a chain of its very own vet clinics across the U.S. Pet owners can access routine, urgent care, and surgical services through these clinics. At the time of Chewy's Q3 call, six of its clinics were already open, consistent with the target of up to eight clinic openings during the entire 2024 year.
Management estimates that the business is unlocking a $25 billion total addressable market opportunity with the launch of these clinics, which have also proven to be valuable sales funnels that expand brand awareness and drive sales back to its e-commerce platform. It's a natural progression that pet owners who go into these vet clinics will also be inclined to place orders from Chewy for any products or prescriptions that their pets need.
Chewy is investing heavily in its growth right now, and that has affected the bottom line. However, the company has still been profitable, generating about $4 million in net income in the third quarter of 2024. Investors who like the pet products and pet healthcare spaces might want to consider a position in this promising growth stock as part of a well-diversified portfolio.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Nvidia:if you invested $1,000 when we doubled down in 2009,you’d have $311,343!*
Apple: if you invested $1,000 when we doubled down in 2008, you’d have $44,694!*
Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $526,758!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
Rachel Warren has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chewy. The Motley Fool has a disclosure policy.
