2 Growth Stocks Down Over 25% to Buy Before They Soar

Holding shares of growing companies over many years can lead to tremendous gains. And when you can buy shares of top growth stocks at lower prices, you get more value for your shares relative to the company's earnings, which can boost your returns over time. Here are two stocks that could deliver excellent returns over the next several years.

1. Celsius Holdings

Celsius Holdings (NASDAQ: CELH) is an emerging brand in a $200 billion energy drink market. A weak retail spending environment led to slowing sales in 2024, which sent the stock down 68% from its previous high. However, its recent earnings report shows the business is still in a solid position for long-term growth.

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Fourth-quarter revenue was down 4% year over year, but most importantly, retail sales of Celsius' products grew 22%, significantly outpacing the total energy drink category. Revenue is growing slower than volumes right now due to timing issues with orders and promotional allowances.

The strong sales volumes indicate Celsius is well positioned for long-term growth. The brand contributed to 30% of energy drink category growth in 2024. It ended the year with 11.8% share of the energy drink market, trailing the 36.6% share of Red Bull and 27.7% share of Monster Beverage.

Celsius also announced an agreement to buy Alani Nu, a female-focused wellness brand, for $1.8 billion. This will expand Celsius' current beverage offerings with a range of flavors that appeal to a wider demographic. Moreover, Alani Nu will contribute to Celsius' profits in the first year of ownership, which indicates it is buying the business at a reasonable valuation that will benefit shareholders.

Celsius is just getting started expanding internationally and also has opportunities to drive demand by expanding its product offering over time. The stock's forward price-to-earnings (P/E) ratio of 29 looks attractive for a company that Wall Street analysts expect to grow earnings per share at an annualized rate of 25% in the coming years.

2. Lululemon Athletica

Lululemon Athletica (NASDAQ: LULU) has a powerful brand in a growing athletic apparel industry worth $211 billion, according to Fortune Business Insights. The company has posted higher revenue growth than industry leader Nike, but inflation and other headwinds pressured sales over the last year. Investors can buy the stock at a discount, trading about 28% off its previous peak.

Lululemon's potential can be seen in the strong growth it is experiencing outside North America. For example, revenue from China grew 39% year over year through the first three quarters of fiscal 2024. But management still sees opportunities to improve growth domestically by bringing more seasonal newness to the assortment, including new colors, prints, and patterns.

Importantly, Lululemon earns an extraordinary return on capital employed of 45%, which is more than double Nike. This reflects Lululemon's premium pricing strategy and store efficiency, where it generates high sales per square foot across its stores.

Lululemon is planning to push into new markets this year by opening stores in Italy, Denmark, Belgium, Turkey, and the Czech Republic. International revenue makes up 26% of Lululemon's total, indicating tremendous growth potential over the next decade.

When consumer spending rebounds, Lululemon could experience accelerating growth that sends its stock soaring. The stock's forward P/E of 23 is very reasonable for a brand that should see double-digit earnings growth over the next several years.

Should you invest $1,000 in Celsius right now?

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John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Celsius, Lululemon Athletica, Monster Beverage, and Nike. The Motley Fool has a disclosure policy.