2 Growth Stocks Down Over 20% to Hold for 10 Years

Warren Buffett advises investors to purchase quality goods when they are discounted, but stock markdowns seldom feel as rewarding. Swiss shoe manufacturer On and Dutch Bros, a drive-thru coffee chain, have both suffered declines of more than 20%. Analysts believe these stocks could deliver strong returns over the next decade.

On's sales grew 17.8% year-over-year, yet they remain below the company's full-year low of 20%. The company's sales hit a record high, and its gross margin reached an all-time high of 66.9% in the third quarter, excluding tariff refunds. On attributes its success to its Premium Playbook, which focuses on innovative products sold at full price without discounts.

On's average shoe price has increased from $145 to $170 over five years, with demand growing. The premium sportswear market is valued at 125 billion Swiss francs and is growing twice as fast as the overall industry. On's brand awareness is over 30%, with management targeting 50%. The stock has a forward P/E multiple of about 17, which is attractive given analysts' expectations of 25% annualized earnings growth.

Dutch Bros, on the other hand, has seen a 43% year-over-year decline. However, Q3 revenue grew 30% to $550 million. The company's biggest advantage is its brand, built on friendly service from its employees called Broistas. Research shows Dutch Bros outperforms the coffee industry average across every aspect of the guest experience. The company plans to open 209 shops by 2029, achieving a shop-level contribution margin of 28.1%, indicating a very profitable business.

Analysts expect Dutch Bros to deliver outstanding returns in the next decade as its stock tracks future earnings, with a current market value of approximately $4.9 billion.