The Next 10 Years Can Be Set Up with These 3 Growth Stocks

Major Points

  • Bear markets present an opportunity to purchase equities at a discount to the value of the underlying businesses.
  • Shares of RH and Roku offer patient investors above-average return chances.
  • The stock of Dollar General has fared well so far this year and should offer long-term returns that are pleasant and stable.

In this down market, there are many fantastic stocks that may be purchased on discount.

Shares of reputable companies have fallen to appealing levels due to economic worries, which might pave the way for excellent gains. While many growth stocks have had more severe declines during this bear market, the S&P 500 index, which measures the performance of some of the largest corporations, is down around 20% year to date.

As individuals who purchased equities during the COVID-19 crisis two years ago well know, market crashes are a common occurrence and can pave the way for enormous returns over the long run. RH (-2.65%), Roku (-2.22%), and Dollar General (-1.43%) are three growth stocks that still have above-average growth prospects and have the potential to beat the market during the ensuing ten years. Learn a little bit more about them now.

1. RH

RH (formerly known as Restoration Hardware) is renowned as a high-end furniture brand, but the business is evolving under the direction of CEO Gary Friedman into a lifestyle brand. Because market participants are still unaware of this important differential, long-term investors have the opportunity to purchase shares at a low price-to-earnings (P/E) ratio of 10, based on this year's consensus earnings projection.

The stock trades at a significant discount to the S&P 500 index's average stock's P/E of 24, which is 24.

The anticipated expansion into the $200 billion North American hotel business is only one of the areas for growth that management is investing in. Along with creating more furniture showrooms throughout the world, RH is also introducing a luxurious boat experience called RH Residences.

The market is pricing RH like a struggling retailer in a downturn, but the company's historical growth—revenue has more than tripled over the last decade—and its evolution into a lifestyle brand indicate that the market is severely undervaluing the enterprise. Given this low P/E ratio, the stock should be significantly higher in ten years.

2. Roku

Another stock that has been badly treated by the market over the past year is Roku, but a long-term investor will benefit from the market's loss. Roku is a fantastic brand when it comes to streaming entertainment. The business has taken control of the North American connected TV market with a market share of almost 50% thanks to its line of reasonably priced Roku TVs.

Roku has a huge chance to capture the advertising expenditure that hasn't migrated from conventional TV thanks to its expanding user base of 61 million active accounts.

The main factor driving the stock decline is Roku's reliance on advertising. But that's a pretty limited perspective on the worth of the company. Roku's dominance in the connected TV market puts it in an ideal position to take a piece of the $60 billion in traditional TV advertising that will eventually migrate to digital platforms. With average revenue per user (ARPU) rising 34% year over year in the first quarter, it is already seeing advertisers spend on its platform.

Increasing the amount of the 269 million smart TVs that will be sold globally in 2020, per Grand View Research, is another possibility. Through 2028, that number is projected to rise at a yearly pace of 21%. That's a sizable number of potential new accounts that Roku may acquire.

Investors significantly underestimate the company's growth in ARPU and its potential to continue acquiring millions of new users over time because the price is down 80% from its highs.

3.Dollar General

Look no further than Dollar General if you want a less volatile growth investment that can nevertheless produce market-beating returns. Year to date, the stock has returned 5% more than the overall market, outperforming it.

For years, Dollar General has offered value-priced delivery of daily necessities. Consumers appreciate shopping at Dollar General to save money during periods of high inflation, which is a major factor in the stock's performance in 2022.

But Dollar General is not immune to the economic difficulties. The company faced challenging year-over-year comparisons to early 2021 when individuals began receiving stimulus checks, which led to a fall in sales of non-consumable categories, which accounted for the majority of the first quarter's same-store sales decline.

The company's 18,000-store base gives them a competitive advantage because it puts a Dollar General store within five miles of 75% of Americans. The business still believes there is space for growth. Last quarter, it completed 800 new real estate projects.

Investors are also paid cash to hold the stock as we wait for the bear market to expire thanks to the 0.9 percent dividend yield. Dollar General delivers stability in the face of market volatility, growth, and dividend income.

The Next 10 Years Can Be Set Up with These 3 Growth Stocks