2 Growth Stocks Down Over 70% That Could Rebound in 2025

Source The Motley Fool

Regularly investing in growing companies is a recipe for wealth-building gains over many years. But when you can buy shares of these companies at attractive valuations, it can help your investments perform even better.

Here are two fallen stocks of companies that are continuing to invest in the future and could be bargains ahead of a rebound.

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1. Celsius Holdings

Shares of Celsius Holdings (NASDAQ: CELH) have been phenomenal performers for investors in recent years, but they are about 70% off their highs. With the energy drink market continuing to grow, this leading brand could be a great buy on the dip.

Revenue was growing more than 100% year over year just over a year ago, but a supply chain adjustment from the company's largest distributor has weighed on the top line. Revenue fell 31% year over year in the third quarter, but actual retail demand for the product is holding up much better. The company said retail and unit sales were up 7% year over year last quarter, which indicates growing demand for Celsius products.

Celsius has benefited tremendously from its distribution agreement with PepsiCo and will continue to do so over the long term. It is the No. 3 brand across tracked channels in the U.S. energy drink market, which is expected to increase from $211 billion in 2024 to $262 billion by 2029, according to Statista.

Moreover, Celsius was responsible for 16% of the growth in the energy category last quarter. Management is continuing to invest in marketing and new products to bring in new consumers, so if the brand can continue to lead the market in growth, it will lead to higher revenue, earnings, and shareholder returns.

The company's "better for you" marketing resonated with consumers by offering products that are made with no sugar or artificial ingredients. And as retailers see more consumers buying Celsius, it builds a relationship that could lead to merchants offering it more shelf space, which could drive further market share gains.

At the current share price of $28, the stock is trading at a reasonable 29 times 2025 earnings estimates. Analysts currently expect Celsius to return to revenue growth in 2025 before accelerating to a double-digit increase in 2026. Assuming those estimates hold up, the stock offers enough value right now to support more gains.

2. Dollar General

Dollar General (NYSE: DG) has a long history of delivering consistent sales growth and superior returns to investors. From 2011 through 2021, the stock had a total return, including dividends, of 516%, significantly beating the S&P 500.

Weak sales trends over the past year sent the stock down 74% off its previous high, and the shares were still hitting new lows at the time of this writing, down to $67. But the shares could be significantly undervalued, as management improves the stores to deliver better financial results.

Dollar General is implementing several improvements to return to growth. It recently made significant improvements to cleaning up stores and increasing the number of in-stock items, where customer surveys have already shown higher satisfaction.

Improvements with the supply chain, including speeding up delivery and implementing automation in distribution centers, may take time to show up in sales and earnings. But the company is not performing as badly as you would think given the stock's recent decline. Net sales grew 5% year over year in the third quarter, with same-store sales up 1.1%.

With management guiding for full-year earnings per share to be between $5.50 to $5.90, it should be able to continue paying a quarterly dividend of $0.59 per share. That brings the forward dividend yield to an attractive 3.52%, nearly three times the S&P 500 yield.

On a forward price-to-earnings basis, the stock is trading at 12 times 2025 earnings estimates. This is cheap if the company can achieve its long-term target of double-digit earnings growth.

All said, the improving customer satisfaction could lead to better financials sooner than Wall Street expects. There's a good chance for a rebound this year assuming Dollar General offers more good news on its progress with store improvements in the next few quarters.

Don’t miss this second chance at a potentially lucrative opportunity

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*Stock Advisor returns as of January 13, 2025

John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Celsius. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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