Investors often flock to the well-known ‘Magnificent Seven’ group of stocks, which includes big names like Apple, Microsoft, and Amazon. However, there are hidden gems in smaller growth stocks that deserve attention. Let’s dive into two intriguing options that might be flying under the radar.
Sweetgreen
- Sweetgreen (NYSE: SG) is a rising star in the restaurant industry, known for its salad offerings. Despite a recent 46% dip from its peak, the stock has seen a 111% surge since the beginning of 2024.
- In 2024, Sweetgreen reported a 16% revenue increase, totaling $676.8 million. With 25 new restaurant openings, the chain now boasts over 230 locations across the U.S.
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The CEO, Jonathan Neman, envisions a bright future for Sweetgreen, focusing on improving the customer experience through new menu items and loyalty programs.
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The innovative Infinite Kitchen automation technology at Sweetgreen sets it apart, allowing for 50% faster salad production compared to manual methods.
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Despite recording a net loss of $90.4 million in the last fiscal year, Sweetgreen’s commitment to healthy meals and sustainable sourcing positions it well to capitalize on the growing wellness trend.
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With an attractive price-to-sales ratio of 4x and a market cap of $2.7 billion, Sweetgreen presents a promising opportunity for investors, especially with its potential for international expansion.
Toast
- Toast (NYSE: TOST) is like the Shopify of the restaurant industry, offering a comprehensive digital platform for managing orders, payments, and inventory.
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Even though the stock is trading 39% below its 2021 IPO price, Toast has recorded impressive growth, with a 28% revenue increase in 2024, totaling nearly $5 billion.
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Toast achieved profitability in 2024, marking a significant milestone with a net profit of $19 million compared to a net loss of $246 million in the previous year.
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The digital platform added 28,000 net locations in 2024, bringing the total to around 134,000, making it a dominant player in the industry.
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Despite facing stiff competition, particularly from companies like Square, Toast’s optimistic outlook for future growth, with projections of double-digit revenue and earnings growth, makes it an attractive prospect for investors.
In conclusion, while the ‘Magnificent Seven’ stocks may shine brightly, exploring lesser-known growth stocks like Sweetgreen and Toast can yield significant returns. With innovation, strategic growth plans, and a focus on customer experience, these smaller companies have the potential to disrupt their industries and generate value for investors. Keep an eye on these hidden gems in the stock market for exciting opportunities in the future.
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