ELF - Stocks to Buy: 3 Hidden Multibaggers Ready to Double Your Money

2024-07-09 06:30:00 ET

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

Multibagger stocks can help you reach your financial goals sooner. And, many growth stocks have enjoyed incredible rallies. Nvidia (NASDAQ: NVDA ) has been the multibagger on everyone’s mind. While the artificial intelligence ( AI ) leader can still generate higher returns for long-term investors, it’s been thrown into the open.

Finding hidden multibaggers can lead to higher long-term gains. Although Nvidia has gained more than 3,000% over the past five years, it’s unlikely to repeat that growth over the next five years. While it’s difficult for any stock to achieve those returns, it’s possible to find stocks that more than double within a few years.

Therefore, investors should set their horizons on companies that have rising revenue and profit margin growth. And these corporations with long-term catalysts can spark further stock gains. These three stocks fulfill those parameters, but they aren’t as well-known. None of these stocks are currently in the S&P 500 and remain hidden. Let’s uncover them now.

Duolingo (DUOL)

Duolingo (NASDAQ: DUOL ) is an educational tech company that makes it easier for people to learn new languages. The company offers verbal and written activities to assist people on the language learning journey. The gamified experience keeps people coming back, based on Duolingo’s 31.4 million daily active users . That’s a 54% year-over-year ( YOY ) increase. Additionally, the number of monthly active users jumped by 35% YOY to reach 97.6 million.

Moreover, revenue and earnings growth rates remained elevated as more people flocked to the Duolingo app. Revenue increased by 45% YOY while net income reached $27.0 million. That’s a big turnaround from the company’s $2.6 million net loss in the same quarter last year.

Notably, Duolingo is quickly gaining momentum and is up by 37% over the past year. The stock has a high P/E ratio, but net profit margins have been soaring. Hence, higher profits and continued revenue growth can make the $8 billion corporation attractive for long-term investors.

Texas Roadhouse (TXRH)

Restaurant stocks have taken off in recent years. Chipotle (NYSE: CMG ) has been  capturing plenty of attention as it’s more than quadrupled over the past five years. A recent 50-for-1 stock split has made Chipotle more affordable on a price-per-share perspective, further bringing more attention to the stock.

However, this isn’t about Chipotle. It’s about Texas Roadhouse (NASDAQ: TXRH ). The steakhouse chain has also benefitted from the growing demand for restaurant stocks. Shares are up by 40% year-to-date ( YTD ), more than tripling over the past five years. Yet, Texas Roadhouse still has a reasonable 34 P/E ratio and offers a 1.46% yield. Very few high-growth restaurant stocks offer a decent P/E ratio and a dividend. Most of them offer neither.

Furthermore, the company reported 12.5% YOY revenue growth and 31.0% YOY net income growth in the first quarter . Comparable restaurant sales jumped by 8.4% YOY, demonstrating plenty of demand for the company’s restaurants. Texas Roadhouse has 753 restaurants. The company owns 644 of those restaurants, and the remaining 109 restaurants are franchises.

Elf Beauty (ELF)

Elf Beauty (NYSE: ELF ) is closing in on S&P 500 eligibility. The cosmetics firm has gained more than 1,300% over the past five years. Shares are up by 45% YTD amid strong financials. Elf Beauty reported 71% YOY revenue growth in Q4 of fiscal year 2024 . The company has now reported 21 consecutive quarters of net sales and market growth. Also, Elf Beauty gained market share for the 5th consecutive year while other beauty firms like Ulta Beauty (NASDAQ: ULTA ) are reporting decelerating sales growth.

In addition, Elf Beauty caters to Gen Z and other generations for using cruelty-free ingredients in its beauty products. The efforts have paid off based on recent financial results. Elf Beauty’s fiscal 2025 outlook suggests the stock can gain more ground. Commentary from Tarang Amin, Elf Beauty Chief Executive Officer ( CEO ), suggests additional catalysts.

“As we look ahead, we believe we are still in the early innings of unlocking the full potential we see for e.l.f. Beauty across cosmetics, skin care and international markets,” Amin stated.

On this date of publication, Marc Guberti held long positions in NVDA, TXRH, and ELF. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines .

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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