Finance
Two growth stocks that could double by 2030
To double your money by 2030, look for companies that consistently show double-digit revenue growth. Assuming you buy these stocks at reasonable valuations, the stock price will generally follow the growth of the company. This is why investing in growth stocks can be the best way to build wealth in the long term.
One area where reasonably priced growth stocks are popping up right now is the $6 trillion global e-commerce market. Here are two fast-growing leaders that could double your investment over the next five years.
1. Shopify
Shopify (NYSE: STORE) shares have been an incredibly rewarding investment for those lucky enough to get in early after the company’s initial public offering (IPO) in 2015. The shares have delivered a 2,800% return, but the company still has plenty of room to continue to grow and deliver great returns for years to come.
Shopify provides businesses with the tools to open and manage an online store. It generates revenue through subscriptions on its platform, but most of its revenue is generated by selling additional services to merchants, including payment processing, lending and shipping.
The vast e-commerce market offers enormous opportunities, as the company’s growth indicates. Second-quarter revenue grew 25% year over year, after excluding the impact of the sale of the logistics business, and management had guided third-quarter revenue to grow in the low-to-mid 20s. Keep in mind that Shopify has been around for over a decade, and is still growing at these high rates.
The company has increased its focus on helping merchants expand internationally, which could continue its momentum for several years to come. Cross-border sales represent only 14% of gross merchandise volume (GMV), but international GMV is growing faster than North America, up 27% year-over-year in the second quarter. This trend shows how products like Shopify Markets strengthen the company’s competitive position as a one-stop shop for merchants.
The stock price-to-sales ratio (P/S). of 12.5 is at the low end of the previous 10-year trading range. With Wall Street analysts estimating that the company will grow its revenue at an annual rate of 21% in the coming years, it should maintain a growth rate of at least 15% through the end of the decade. That’s enough to double the stock’s value, assuming it continues to trade around its historical average P/S multiple.
2. Coupang
Coupang (NYSE: CPNG) is the leading one ecommerce store in Korea. It has more than doubled its revenue since 2020. It fell immediately after its IPO a few years ago, and the stock is now reasonably priced relative to its growth potential. Coupang should deliver market-based returns.
Second quarter adjusted revenue grew 23% year-over-year, excluding the impact of the acquisition of luxury goods retailer Farfetch. Shares are down 54% since their 2021 IPO but are up 16% over the past year as the company has shown the potential to improve margins and profitability.
Coupang generated $1.5 billion in free cash flow on $27 billion in revenue last year – a respectable margin for an online retail company. The company, through its WOW membership program, uses non-retail services such as food delivery to build customer loyalty and increase margins. That will sound very familiar Amazon Prime customers, demonstrating Coupang’s opportunities.
Investors might underestimate the growth potential in the services sector and the impact on Coupang’s profitability. Gross margin improved by two percentage points last quarter, excluding the impact of Farfetch, thanks to supply chain efficiency and growth in margin-enhancing service offerings. The company is also leveraging investments in artificial intelligence automation to boost productivity.
Meanwhile, the stock trades at a modest price-to-earnings ratio of 1.48, which is lower than Amazon’s price-to-earnings ratio in its early years of growth. Analysts expect Coupang to grow sales by more than 16% per year in the coming years.
With Coupang still in the early stages of its expansion in Taiwan, revenues should continue to grow at double-digit rates through the end of the decade. The stock just needs to continue trading at its current reduced P/S multiple for shareholders to double their money by 2030.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Johannes Ballard has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in Amazon, Coupang, and Shopify. The Motley Fool has one disclosure policy.
Two growth stocks that could double by 2030 was originally published by The Motley Fool
