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The US stock market is close to all-time highs, driving many growing stocks to trade at high valuations.
2 stocks that have offered great returns to investors
It is becoming harder to find strong companies with lasting competitive advantages that do not trade at astronomical multiples of earnings.
According to John Ballard, one of The Motley Fool contributors, two titles to buy today are CarMax (NYSE: KMX) and RH (NYSE: RH) (formerly known as Restoration Hardware).
These companies have provided large returns for investors but still have plenty of growth opportunities in sight to drive market returns for several years.
CarMax is the largest used vehicle seller in the United States. Its large selection, competitive pricing and customer-friendly sales process have produced steady growth in revenues and returns that have beaten the market for investors over the past decade.
CarMax continues to invest in new services, such as instant online valuations, which should further strengthen its lead in the used vehicle market.
CarMax has two important competitive advantages that investors should be aware of before purchasing the stock.
First, it has a wealth of data that it can use to drive growth. CarMax evaluates more than 8 million vehicles every year.
It not only has in-depth pricing data, but also vehicle and website activity data based on over 300 million digital interactions each year.
A second advantage is the investment that CarMax is making in its omnichannel experience.
In fiscal year 2021, approximately 96% of customers who purchased a vehicle from CarMax first started searching on the company’s website.
CarMax recently acquired Edmunds, which complements the recently launched new online instant assessment service.
By fiscal year 2026, management expects to be able to sell 2 million units annually through combined retail and wholesale.
RH’s focus on building luxury brick-and-mortar stores, or galleries, shows that its business can still function, in today’s retail environment, where e-commerce spending has increased as a percentage of retail spending. total in recent years.
However, RH is not totally addicted to those stores, as it also operates an e-commerce channel.
During the pandemic, revenue growth accelerated and the company’s momentum continued through fiscal second quarter of 2021, with revenue growing 39% year-over-year.
RH is benefiting from its premium brand in the home furnishing market, but this is a title to consider buying right now for another important reason.
Spending on housing remained quite strong until 2021, this is a result of the suburban migration trend, which is leading to an increase in property square footage and demand for furniture.
RH management has ambitious plans to transform the company into one of the best consumer brands in the world.
RH currently covers a wide range of design categories, including RH Interiors, RH Baby & Child, RH Ski House, RH Beach House, and other categories. He plans to launch RH Contemporary next year, in addition to plans for RH Couture, RH Bespoke, RH Color, RH Antiques & Artifacts, and others over the next decade.
Management is aiming for long-term global revenue of $ 20 to $ 25 billion, which shows a long track of growth versus final revenue of $ 3.5 billion.