Buying stocks can lead to more wealth. Your money will work for you and push you closer toward meaningful financial goals. However, you have to invest in the right stocks to increase your chances of success.
Corporations with rising revenue and profit margins look promising. These companies also need to have competitive advantages and plenty of runway in addition to having strong financials. These three stocks to buy exhibit those characteristics and can bring your portfolio higher.
Nvidia (NVDA)
This stock has delivered generational wealth for its long-term investors. Nvidia (NASDAQ:NVDA) is up by more than 2,700% over the past five years and has more than doubled year-to-date.
Nvidia’s Blackwell platform is leading the AI boom and has poised the company for the next wave of growth. The company’s innovative AI technology resulted in 262% year-over-year revenue growth in Q1 FY25. Profit margins also improved based on the firm’s 628% year-over-year net income growth.
Nvidia also stirred up excitement with its 10-for-1 stock split. While stock splits do not make a company more valuable, this stock split has a few benefits that can further push up the stock price. The first advantage is that a lower stock price can increase the likelihood of Nvidia getting added to the Dow Jones Index.
The second perk is that a lower price per share should stimulate options trading. Options can increase the volatility of the underlying asset and lead to more gains if the majority of options traders buy calls. Given Nvidia’s historical gains and strong financial performance, it’s likely that NVDA calls outpace its put options.
Elf Beauty (ELF)
Elf Beauty (NYSE:ELF) delivered an exceptional earnings report as other beauty brands warned about slower sales growth. The company had its first fiscal year of more than $1 billion in net sales which was a 77% year-over-year increase. Q4 FY24 revenue was up by 71% year-over-year and came to $321.1 million. Net income was down by roughly 12 year-over-year and came to $14.5 million.
Elf Beauty’s guidance implies a net sales increase of 20% to 22% year-over-year in fiscal 2025. This lower guidance initially scared away investors, but Elf Beauty has a history of significantly outperforming its benchmarks and raising its full-year guidance. Elf Beauty raised its guidance in the first, second, and third quarters of fiscal 2024.
The cosmetics company forecasted a 22%-24% year-over-year revenue increase for fiscal 2024. Leadership has regularly issued modest guidance so it can easily beat and raise its benchmarks. That’s why shares rocketed up by 15% upon the earnings release. While guidance looks discouraging, Elf Beauty followed the same script in 2024. The company forecasted 22%-24% growth and ended up with 77% year-over-year net sales growth instead.
Chipotle (CMG)
Chipotle (NYSE:CMG) is a top fast food restaurant that offers healthier choices than most of its competitors. This dynamic has allowed Chipotle to raise its prices multiple times without losing traction. While other fast food restaurants have lost demand due to price fatigue, Chipotle’s earnings report told a different story.
Q1 2024 revenue increased for the Mexican restaurant chain by 14.1% year-over-year to reach $2.7 billion. Diluted EPS increased by 23.9% year-over-year to reach $13.01 per share. Chipotle also opened 47 new restaurants and remains on track to open 285-315 new restaurants this year.
Chipotle has a long-term goal of more than doubling its domestic business and expanding internationally. Those ambitions combined with a quality experience suggest the stock can rally for several years. So far, Chipotle is living up to the hype. Shares are up by 40% year-to-date and have surged by 373% over the past five years. A recently announced stock split should spur additional demand for the stock.
On this date of publication, Marc Guberti held long positions in NVDA and ELF. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.
