2 Growth Stocks Down 29% to 67% to Buy Now

Finding emerging brands while they're still small can be a great way to uncover monster stocks over the long term.

But fast-growing companies often come with lofty expectations. Shifts in market sentiment can send share prices lower. For patient investors, these dips can be an opportunity to buy shares at attractive prices before stronger results lift the stock again.

Here are two promising stocks that have fallen well off their recent highs, even as their underlying businesses continue to deliver explosive sales growth.

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E.l.f. Beauty: Down 67%

E.l.f. Beauty (NYSE: ELF) is emerging as one of the leading cosmetics brands. Its strategy has been to offer premium products at competitive prices. In the high-inflation environment of the past few years, this has benefited the business. If it continues to report robust sales growth, the recent sell-off in the stock won't last long.

E.l.f. Beauty is scaling from a small upstart to a large, mainstream brand. That's no easy feat in a competitive market. Management noted that it owns four out of only 14 cosmetics and skincare brands that have surpassed $200 million in annual retail sales. Over the last three years, the company's trailing-12-month revenue has grown from $578 million to $1.52 billion.

It is gaining market share and shelf space at major retailers, including Walmart. In cosmetics, the brand is growing about twice as fast as its competitors in the U.S. market. Its skincare products are growing even faster, indicating that consumers are increasingly associating the e.l.f. logo with quality at an affordable price across categories.

Overall, the company's net sales grew 38% year over year to $489 million in the recent quarter. This level of growth is impressive given the choppy consumer spending environment. The stock is down 67% from its highs, bringing its forward price-to-earnings (P/E) multiple to 24 -- a very reasonable price for a fast-growing consumer brand.

On Holding: Down 29%

On Holding (NYSE: ONON) stands out in the footwear market. Uncertainty over near-term demand trends has pulled the stock down 31% from its recent highs. Looking at the big picture, this emerging shoe brand still shows tremendous growth potential, with sales surging 35% year over year on a constant-currency basis in the most recent quarter.

A real sign of the brand's strength is pricing power. Its strong growth last quarter was a pivotal test of the brand's ability to maintain its premium-priced positioning in the marketplace. Its ability to sustain full selling prices without resorting to discounting, as other brands do, indicates a durable brand.

Of course, keeping prices up and maintaining strong sales is only possible if you've got a quality product. On doesn't have the massive marketing budget of its larger footwear competitors, yet consumers are clearly flocking to its unique cushioning technology. It shows that consumers are willing to pay up for superior comfort.

The stock is trading down 29% from its recent highs, bringing the forward P/E down to 26. This is an attractive valuation for a brand growing sales and earnings by more than 30% year over year.

John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends On Holding, Walmart, and e.l.f. Beauty. The Motley Fool has a disclosure policy.