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2 Growth Stocks You Can Buy Right Now With Less Than $100

With several brokerages charging no commissions to trade stocks, it has become easier than ever to start investing small sums of money. You shouldn’t feel discouraged starting with $100 or less. Remember, you can always add to that amount down the road.

You can do so by regularly investing the same amount at regular intervals in a strategy called dollar-cost averaging. Although it’s a little nerve-wracking to buy shares when the market has dropped, under this strategy, you buy more shares at lower prices and fewer at higher prices.

Two growth stocks, Chewy (NYSE: CHWY) and Coty (NYSE: COTY), still have solid long-term prospects. While these types of stocks typically become expensive during bull markets, with their prices having dropped by 51% and 33% this year, respectively, you can start investing at attractive valuations.

Image source: Getty Images.

Chewy

Chewy sells a wide range of pet products and services online. These include prescriptions and telehealth services. This is a good business since many people think of their pets as family members, and offering convenience and attractive prices makes Chewy an attractive destination.

With the pandemic forcing people to stay home, they adopted pets, helping supercharge Chewy’s 2020 sales growth. In that fiscal year, which ended on Jan. 31, 2021, the top line increased by 51% to over $2 billion.

While it’s hard to replicate that kind of growth, Chewy continues to increase sales at a nice clip as people remain committed to caring for their pets. In the latest fiscal quarter, which ended May 1, year-over-year sales increased by better than 13.7% to over $2.4 billion.

The number of active customers grew by 4.2% to 20.6 million. And they’re spending more money. Sales per active customer were $446, a 15% year-over-year increase. Better still, the amount increases over time with customers spending under $200 their first year, rising to $700 in year five, and eventually going to about $1,000 annually.

Chewy also saw its gross margin stabilize at 27.5% compared to 27.6% in the year-ago period. It was able to pass along price increases while dealing with supply chain issues. And the company has also returned to profitability over the last couple of quarters. Prior losses don’t allow us to use the price-to-earnings ratio (P/E) as a valuation metric. However, on a price-to-sales basis, the stock sells for a 1.3 multiple, down from three at the start of 2022.

Coty

Coty has a nice stable of owned and licensed fragrances, cosmetics, and skin/body care products. This includes a good mix of popular brands, such as CoverGirl and MaxFactor, sold at mass retailers, as well as prestige lines like the “philosophy” brand sold at higher-end retailers. Consumers can also buy them online, an increasingly important channel for Coty that accounted for a high-teens percentage of the latest quarter’s sales.

Coty’s top line continues to grow. In its fiscal third quarter, ended on March 31, sales — excluding acquisitions, divestitures, and foreign currency translations — increased by 19%. And despite well-publicized supply chain issues and other cost pressures plaguing the retail industry, its adjusted gross margin expanded by 2.4 percentage points year over year to 64.6%. Its adjusted operating profit was 11% higher.

The future looks rosy for the company. Its consumer beauty business, 39% of last quarter’s sales, continues to gain worldwide market share over rivals. In the latest quarter, adjusted sales grew by 10%. The balance of its sales comes from its prestige brands, whose sales increased by 25%, helped by product innovations.

Despite exiting Russia, which made up 3% of the company’s sales, Coty expects mid-teens-percentage sales growth for all of fiscal 2022. The stock has a price-to-earnings ratio of 47, down from a multiple of over 120 in April.

These two growth stocks retain solid prospects. And while fast-growing companies typically sell at more expensive valuations, you can buy these two stocks at much cheaper valuations than just a few months ago. The combination should prove irresistible.

Lawrence Rothman, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chewy, Inc. The Motley Fool has a disclosure policy.

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