In the ever-evolving stock market landscape, identifying growth stocks with the potential to deliver substantial returns over the next decade is akin to finding hidden treasures. With 2023 receding ever further in the rearview mirror, investors are keenly searching for companies poised not just to ride the waves of current trends, but also to innovate and lead in their respective industries.
This article aims to spotlight six such growth stocks that are not only thriving today but are also strategically positioned for robust growth over the next 10 years.
Our methodology for selecting growth stocks
There’s no perfect formula when it comes to picking growth stocks. Some investors focus on smaller market cap companies that could explode in value, while others focus on large market cap behemoths that have a proven growth track record and dominate their respective markets (think Amazon or Google).
For the purposes of this article, we’ve tried to select companies that are well-established and have a proven track record, but they still have ample room for growth. For this reason, we’ve filtered for companies that have a valuation between $50 billion and $950 billion, aggressively reinvest their earnings into R&D instead of paying out dividends, and have a P/E greater than 20, which usually indicates that the market is betting on the company’s long term growth (and is prepared to pay a premium for owning it).
The 6 best growth stocks to buy now: Top picks for a 10-year investment window
In the following sections, we are going to examine some of the best stock market picks that could see robust growth in the coming years. Please note that this selection is based on this author’s opinion and is meant for informational purposes only.
1. Meta Platforms (NASDAQ: META)
- Sector: Technology Services
- META Stock Price (1-Year Change): $367.46 (+172.25%)
- Revenue Growth (TTM YoY): +7.48%
- Analyst Rating: Buy
Meta Platforms (formerly Facebook), founded by Mark Zuckerberg in 2004, is a tech giant known for its social media influence. Owning Facebook, Instagram, and WhatsApp, Meta focuses on digital advertising using vast user data for revenue. Despite facing privacy concerns, it remains influential in the digital realm. Recently, Meta is steering towards the “metaverse,” a venture into virtual and augmented reality, symbolizing a shift in internet interaction and engagement.
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Why Meta Platforms?
Meta is currently in an interesting position – its nearly 28% research and development ratio highlights its efforts to grow in the future and not rest on its laurels of being the largest social media company in the world. In the past two years, Meta has invested heavily in the metaverse (with little to show for it so far, to be fair), launched Threads, a Twitter competitor that saw immense growth post-launch, and launched an open-source competitor to OpenAI’s ChatGPT.
If these investments turn out to produce new revenue streams in the future, and the company manages to retain its social media market share dominance, there’s little doubt that Meta could provide investors with solid growth opportunities in the next decade. On the other hand, even if Meta fails in its most recent endeavors, the combined value of Facebook, Instagram, and WhatsApp should provide enough juice for Meta to grow in the future (albeit at a much slower pace).
2. PDD Holdings (NASDAQ: PDD)
- Sector: Retail Trade
- PDD Stock Price (1-Year Change): $143.16 (+51.81%)
- Revenue Growth (TTM YoY): +56.30%
- Analyst Rating: Strong Buy
PDD Holdings, formerly known as Pinduoduo, is a prominent Chinese e-commerce platform established in 2015. It distinguishes itself through a unique group-buying model, where users obtain better deals by shopping in teams. PDD emphasizes agriculture and consumer goods, connecting farmers and distributors directly with consumers. This approach has rapidly gained popularity, especially in rural and lower-tier cities in China. Despite intense competition in the e-commerce sector, PDD has carved out a significant market share and is known for its cost-effective products and engaging shopping experience.
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Why PDD Holdings?
PDD’s launch of the Temu marketplace in September 2022 turned out to be a very lucrative decision. Competitive pricing and aggressive marketing strategies have helped Temu quickly capture a significant market share in the US, the UK, Australia, New Zealand, Spain, Italy, and France. This has obviously reflected well on the PDD stock price, which gained over 50% in the past year and over 120% since the launch of Temu.
PDD’s financials also saw a significant boost, with revenue increasing by over 56% and gross profit increasing by nearly 40%. Still, there seems to be more room for growth in the future, as the company’s P/E of 32.1 is well below that of some other e-commerce giants (Amazon has a P/E of 79.8, for instance). In the last earnings report, PDD Holding’s EPS increased by +26%, and they are projected to increase by another +10% in the next reporting period.
3. Vertex Pharmaceuticals (NASDAQ: VRTX)
- Sector: Health Technology
- VRTX Stock Price (1-Year Change): $437.49 (+47.61%)
- Revenue Growth (TTM YoY): +11.77%
- Analyst Rating: Buy
Vertex Pharmaceuticals, founded in 1989, is a leading American biotechnology firm specializing in developing and commercializing therapies for serious diseases. Renowned for its innovative treatments for cystic fibrosis (CF), Vertex has significantly impacted CF care with groundbreaking drugs that target the disease’s underlying genetic causes. The company focuses on research and development in other areas as well, including cancer, pain, inflammatory diseases, and genetic disorders. Vertex’s commitment to cutting-edge science and patient care positions it as a key player in the biotech industry.
Buy Vertex Pharmaceuticals Stock
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Why Vertex Pharmaceuticals?
The broader healthcare sector is one of the most rapidly growing sectors in the US. The Centers for Medicare & Medicaid Services expects the growth rate of health-related expenditures to outpace GDP growth in the next decade. With an aging population and the cost of healthcare steadily rising, health-focused companies are likely to benefit from the trend.
Vertex Pharmaceuticals is focused on this long-term trend, heavily investing in R&D (37% ratio) while managing to grow its revenue at the same time (+11.8% in the past 12 months). The company is expected to increase its earnings per share to $4.08 (up from $3.72 in the previous period). It’s worth noting that the company managed to string along 10 consecutive earnings reports that were above analysts’ expectations, which is definitely an impressive feat.
4. MercadoLibre (NASDAQ: MELI)
- Sector: Retail Trade
- MELI Stock Price (1-Year Change): $1672.67 (+65.42%)
- Revenue Growth (TTM YoY): +11.77%
- Analyst Rating: Strong Buy
MercadoLibre, founded in 1999, is Latin America’s leading e-commerce and payment platform. Often likened to eBay and PayPal, it provides a comprehensive suite of services, including an online marketplace, a payment service called MercadoPago, and MercadoEnvios, a logistics service. The company has expanded beyond its Argentine roots to dominate in multiple Latin American markets, adapting to local needs. MercadoLibre has thrived by offering a diverse array of products, user-friendly interfaces, and secure transaction systems, pivotal in digitalizing trade in the region.
Buy MercadoLibre Stock
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Why MercadoLibre?
With a strong presence in South America, counting over 174 million users across Argentina, Brazil, Uruguay, and more than a dozen other countries, Time selected MercadoLibre as one of the 100 most influential companies in the world. The e-commerce company is rapidly expanding, having invested billions in new distribution centers since 2019.
The company saw an impressive 36.7% increase in revenue growth in the past 12 months and an even more impressive 47.2% growth in gross profits in the same time period. The growth is expected to persevere in the medium term, with CoinCodex predicting a +117% increase in stock price by next January. Another encouraging point is that MercadoLibre managed to generate nearly half of its revenue from fintech services, which makes the company less reliant on the success of its core online shopping business.
5. Booking (NASDAQ: BKNG)
- Sector: Consumer Services
- BKNG Stock Price (1-Year Change): $3,503.70 (+57.59%)
- Revenue Growth (TTM YoY): +28.76%
- Analyst Rating: Buy
Booking Holdings, established in 1997, is a global online travel agency leader, primarily known for Booking.com. It offers a wide range of travel-related services, including accommodations, flights, car rentals, and restaurant reservations. The company excels in providing a diverse array of travel options combined with user-friendly technology, making it a favorite for travelers seeking convenience and choice. With a strong presence in over 200 countries, Booking Holdings has reshaped the travel industry, emphasizing customer experience and seamless online booking.
Buy Booking Stock
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Why Booking?
Following a disastrous period during the Covid years, the industry sector has rebounded strongly and is projected to reach $987 billion by 2032 (5.2% CAGR), according to Custom Market Insights. Booking, being the most popular online booking platform, is in a perfect spot to benefit from this trend. The company has a proven business model, which churned out a whopping $3.1 billion in net profit in 2022 and is expected to show a net profit of nearly $4 billion in 2023.
Since going public in the late 1990s, Booking has produced steady gains for its investors, which saw the company’s shares grow from a low of $15 in 2000 to the current high above $3,500. The steady and robust uptrend could continue in the coming months – according to the Booking stock forecast algorithm, BKNG could see 58% gains in the next year.
6. Synopsys (NASDAQ: SNPS)
- Sector: Technology Services
- SNPS Stock Price (1-Year Change): $509.68 (+54.42%)
- Revenue Growth (TTM YoY): +15.42%
- Analyst Rating: Strong Buy
Synopsys, Inc., founded in 1986, is a global leader in electronic design automation (EDA) and semiconductor IP. It provides software, IP, and services used in the design and manufacturing of chips and electronic systems. Renowned for its innovations in chip design and verification, Synopsys plays a critical role in advancing technology in the rapidly evolving semiconductor industry. Its tools and solutions are essential for designing high-performance, energy-efficient chips found in everything from computers to mobile devices and the Internet of Things (IoT) devices.
Buy Synopsys Stock
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Why Synopsys?
The global demand for semiconductors is rising – with McKinsey predicting the industry to reach $1 trillion by 2030 – driven by advancements in areas like 5G, artificial intelligence, the Internet of Things, and electric vehicles. As a key player in the semiconductor supply chain, Synopsys is well-positioned to benefit from this trend.
Recently, Synopsys has been investing heavily in research and development, reaching an R&D ratio of 33.26%. Meanwhile, the company has managed to produce stable revenue growth of 15.4% in the past 12 months, while maintaining 15.9% gross profit growth.
The bottom line
This article has hopefully provided you with new investment ideas that could benefit your portfolio in the long run, even if you don’t invest in the companies we’ve selected. Ultimately, a decade is a very long time, and no one can know for sure what the market will be like in a couple of months, let alone a couple of years.
If you want to explore less risky investment options in the stock market, check our selection of the best dividend stocks. For a more general overview of good investment opportunities, check our monthly updated list of the best stocks to buy.
Source: https://coincodex.com/article/36739/best-growth-stocks/