Two Growth Stocks Experiencing over 70% Decrease that Might Bounce Back in 2025
Investing in up-and-coming companies can lead to significant wealth-building gains over time. However, buying shares at attractive valuations can really amplify your returns. Here are two fallen stocks that continue to invest in their futures and could be bargains before their resurgence.
1. Celsius Holdings
Celsius Holdings, the energy drink company, has been a fantastic performer for investors in recent years but is now trading at around 70% off its highs. With the energy drink market continuing to grow, this leading brand might be a great buy on the current dip.
In the past, revenue growth was skyrocketing, exceeding 100% year over year. However, a supply chain adjustment from the company's largest distributor impacted its revenue, which dropped by 31% year over year in the third quarter. Despite this dive, retail demand for Celsius products is holding up, with retail and unit sales increasing by 7% year over year last quarter.
Celsius benefits tremendously from its collaboration with PepsiCo and its third position in the U.S. energy drink market. This market is projected to swell from $211 billion in 2024 to $262 billion by 2029, according to Statista. Moreover, Celsius was responsible for over 16% of the energy category's growth last quarter.
Celsius's marketing strategy—focusing on "better for you" products made with no sugar or artificial ingredients—has struck a chord with consumers. As retailers notice more consumers purchasing Celsius, this could lead to merchants providing more shelf space and further market share gains.
At the current share price of $28, the stock is trading at a reasonable 29 times 2025 earnings estimates. Analysts expect the company to return to revenue growth in 2025 before accelerating to a double-digit increase in 2026. Assuming these predictions remain accurate, the stock offers enough value for additional growth.
2. Dollar General
Dollar General is a time-tested stock with an enviable track record of consistent sales growth and impressive returns to investors. Between 2011 and 2021, the stock had a total return, including dividends, of 516%, significantly outperforming the S&P 500.
Unfortunately, weak sales trends caused shares to plunge 74% off their previous peak, despite hitting new lows at the time of publication, down to $67. However, the shares might be significantly undervalued as management works on improving stores for enhanced financial results.
Dollar General is introducing several enhancements to revive its performance, including significantly improving the cleanliness of stores and increasing the number of in-stock items, both of which have already seen higher customer satisfaction ratings. Improvements to the supply chain, which will include speeding up delivery and implementing automation in distribution centers, may take time to manifest in sales and earnings, but they are essential steps forward.
Dollar General's net sales still grew 5% year over year in the third quarter, with same-store sales increasing 1.1%. Management anticipates full-year earnings per share to sit between $5.50 and $5.90, enabling the company to continue paying its current quarterly dividend of $0.59 per share and providing a forward dividend yield of a compelling 3.52%, nearly triple the S&P 500 yield.
As a forward price-to-earnings (P/E) ratio of 12, the stock is trading at a reasonable valuation, considering its long-term target of double-digit earnings growth.
In conclusion, both Celsius Holdings and Dollar General are facing challenges but exhibit promising prospects. By addressing their current issues and tapping into the market trends, both companies could offer substantial investment returns.
Investors might find the current dip in Celsius Holdings' share price appealing, given its potential in the growing energy drink market. With its collaboration with PepsiCo and strong marketing strategy, the company could see significant returns once it recovers from its temporary revenue dip. (money, investing)
Dollar General's success over the years has proven its resilience in the retail sector. Despite facing weak sales trends and plummeting share prices, the company's ongoing improvements in store cleanliness, inventory, and supply chain could lead to improved financial results and attractive dividend yields, making it a potential investment opportunity for finance-minded individuals. (finance, investing)