2 Growth Stocks Wall Street Might Be Sleeping on, but I'm Not
With the market in turmoil, each day brings a fresh wave of investing decisions. The market is making its way back up from lows, avoiding a full-on crash — for the time being, at least.
In these kinds of times, investors typically avoid younger growth stocks and flock toward safe stocks. But not all young growth stocks are super risky, and now is an excellent time to load up on incredible growth stocks that Wall Street might be sleeping on today. Revolve Group (RVLV -1.97%) and E.l.f. Beauty (ELF 1.31%) are great choices.
1. Revolve Group: The digital fashion disruptor
Like everything else in the world, fashion is changing. And although you might not consider a company that sells clothing a technology innovator, Revolve very much is, which is why tech investors shouldn’t overlook it.
Revolve has used artificial intelligence (AI) throughout its organization from well before it became today’s buzzwords. The company used AI when it developed its business more than 20 years ago, and AI and machine learning have informed everything management does, from inventory management to website design to marketing. Because it’s all online, Revolve can easily change around its product assortment based on data about what products are selling, meeting demand and managing business more efficiently, a win-win. That leads to higher full-price sales since it has less to mark down at the end of a season and stronger margins.
Although Revolve has started to recover from the worst of inflation-induced struggles with increasing sales, it has maintained profitability throughout. In the 2024 fourth quarter, revenue increased 14% year over year, and gross margin improved from 52% to 52.5%. Net income increased 237%, and free cash flow turned positive to $1.8 million.
The company has also continued to demonstrate strong performance in its softer metrics. It always reports three important measures of success: active customers, total orders placed, and average order value.
Active customer count consistently increases, implying that customers are still shopping at Revolve, even if they’re spending less. In Q4, active customers were up 5% more than the year before, total orders placed increased 7%, and average order value was still down 1%. This bodes well for when consumer spending is in a better place.
Management has a lot in store for this year and beyond. It’s expanding its product assortment from its focus on women’s fashion to embrace more men’s styles, beauty, shoes, and accessories. Furthering the success of its pop-up stores, it’s going to launch its first full-time physical store in Los Angeles. It’s also building more basics into its merchandise, moving out from the concentration on party and evening wear, and expanding its own brand lines, which are cheaper to produce and easier to change styles.
Revolve stock is down 42% this year, and it trades at a forward, one-year price-to-earnings (P/E) ratio of 22. The company is still at the beginning of its journey, and don’t let this opportunity pass you by.
2. E.l.f.: Connecting with today’s cosmetics buyer
E.l.f. is also disrupting a traditional industry, in this case cosmetics, with its fun, cheaper line of makeup and skincare. It has a robust social media strategy and a focus on the digital customer, but it’s also available through many wholesale physical outlets.
This business is all about its branding, which targets the young, value-driven consumer. It touts its commitment to bettering the environment and often talks about its high percentage of women in leadership and board roles in its marketing campaigns. Customers are drawn to its messaging, and lower prices reinforce its strategy.
The response has been exceedingly positive, and e.l.f. has skyrocketed to the top of the mass cosmetics industry. It has the top spot in color cosmetics unit share and the No. 2 spot in dollar share, where it has 12% of the dollar share. It’s in the top 10 in skincare, where it’s aiming its arrows right now. It has some of the top-selling products in 18 different cosmetics categories, including prestige, at a fraction of the prices of competitors.
The market hadn’t been thrilled with e.l.f. even before the tariffs spun everything upside down. Sales increased 31% year over year in the 2025 fiscal third quarter (ended Dec. 31, 2024), and gross margin expanded by 0.4 percentage points to 71%. However, it’s coming at a cost, and earnings per share (EPS) fell from $0.46 to $0.30. The market has been concerned about slowing growth and increasing expenses.
E.l.f. stock is down 54% in 2025 alone, a crushing decline. But there’s so much continued opportunity, and this looks like a great time to buy. Unaided awareness increased from 13% in 2020 to 33% today, which is still below its major competitors. It’s been the top favorite teen brand for six years straight, according to the “Piper Sandler Taking Stock With Teens” annual survey, and these young customers will drive future growth.
At the current price, e.l.f. stock trades at a forward, one-year P/E ratio of only 14. While there may be more turbulence ahead as tariffs take hold, I think the market is taking its negative sentiment too far. If you have a long enough time horizon and some appetite for risk, e.l.f. stock looks like a bargain at the current price.