The stock market has reached near all-time highs with just a handful trading days left in 2021. But a lot of growth stocks haven’t been a part of that rally, especially in the final weeks of the year. That slump is creating some great opportunities for investors to buy who are willing to take some risk on the volatility in exchange for owning the stocks with an unusually strong earnings and sales potential.
With that in mind, let us look at why these two stocks — Garmin (NYSE:GRMN) and Lululemon Athletica (NASDAQ:LULU) are attractive buys today.
Athleisure is a global business
By the end of 2021, Lululemon will have almost doubled its yearly sales footprint since 2018. But there is more room for this apparel specialist to have growth beyond its current $6.3 billion revenue. The company is finding high demand in categories like outerwear and menswear, and it has only just began tapping the potential in markets such as China.
Some traders remain concerned right now because of the impact a new COVID-19 strain could have on short-term sales. The shares have decreased more than 20% from their peak earlier this year.
Yet, the company’s finances are in great shape. Gross profit margin has been increasing steadily for several years despite rising expenses in 2021. The current 57% rate is about 10 percentage points above Nike’s.
Lululemon has a long way to go before reaching the $40 billion in global earnings that Nike currently enjoys. But its powerful performance through the COVID-19 pandemic means it should achieve many of the five-year goals set by management in 2019. These include the doubling in the size of the menswear company and the quadrupling of the international segment.
It might be a lucrative ride for investors to participate in.
Navigating toward success
Garmin also is not getting the credit it deserves from the market. The tech giant has used its power in innovation to build an impressive product portfolio such as smartwatches, consumer electronics like fitness trackers and high-end navigation platforms found in airplanes and boats.
That diverse offering has helped it consistently grow sales over the last five years even as some niches, such as car GPS devices, declined. Revenue has increased 27% so far this year and will likely cross $5 billion in 2021, up from $3.3 billion in 2018.
Yet, just as with Lululemon, the share price hasn’t followed the business’ improving trajectory. In fact, the stock price is down 25% from their peak in late Aug. thanks to Wall Street’s move away from higher-growth companies toward the relative safety of larger, more dependable profit generators.
Still, Garmin has maintained a strong income potential, at least in part because of a high profit margin on its premium tech items as well as its growing aviation and marine segment. Revenue this year is set to hit $5.60 per share, according to management’s newest forecast, compared to $5.14 the year before.
Meanwhile, the operating margin is predicted to dip just slightly, to 24% of sales from 25%, as the company invests in its manufacturing ability. That production upgrade will let Garmin enter 2022 with a far higher capacity.
There is no telling how much longer the current trader sentiment will put pressure these stocks. But buying shares of strong companies like Lululemon and Garmin tends to work out great for growth-focused traders. It’s also a nice bonus to purchase these stocks at a discount.
Author: Steven Sinclaire