Some investors check their holdings daily, if not more often. It’s exciting to see what’s going on, especially when the news is good. However, the real gains come in the years and decades it takes to pump out sustained growth and performance. It’s less dramatic, but way more valuable.
If you can shut your eyes and imagine how much your investments could grow by 2030, or over the next six or so years, you would probably be delighted with a 200% gain. If you’re ready to ignore the noise and get there, consider MercadoLibre (MELI) and On Holdings (ONON), two stocks with powerful growth drivers.
MercadoLibre: The leading e-commerce company you’ve never used
Unless you’ve lived in Latin America, you haven’t been able to avail yourself of MercadoLibre’s services. But if you did live there, you’d probably be using its platform, which is the largest e-commerce and fintech platform in 18 countries in South America.
It’s already the largest, but its growth rates are phenomenal, and the opportunity is massive. The core e-commerce business continues to crank out robust growth rates, and gross merchandise volume increased 71% year over year (currency neutral) in the 2024 first quarter.
MercadoLibre has branched out into fintech services, and these are growing even faster, presenting even bigger opportunities. Total payment volume (TPV) increased 86%, and the company is growing its customer base, with monthly active users up 38% from last year.
Could it really grow 300% over the next six years? MercadoLibre stock has traded at an average price-to-sales ratio of 5.2 over the past two years, and it has a market capitalization of $89 billion.
Keeping the price-to-sales ratio constant, tripling over the next six years implies a market cap of $267 billion and annual sales of $51 billion. That implies a compound annual growth rate (CAGR) of 21.6%. 2023 sales increased 83% (currency neutral) in 2023 and 94% in the 2024 first quarter, so that seems very doable. Even at a lower price-to-sales ratio, it looks more than within reach.
Investors looking for a top growth stock should look into MercadoLibre stock.
On: The newest name in premium running shoes
On is a Switzerland-based premium activewear company focused on footwear and known for its cloudTec running shoes. It was developed by and for athletes, and it’s resonating with customers everywhere looking for a well-crafted, more comfortable shoe.
Given its high-tech nature, On targets an affluent clientele and commands premium prices. It believes it has a better product and charges accordingly, and customers agree. That’s leading to incredible growth, strong loyalty, and higher full-price sales, which in turns leads to expanded margins and robust profitability.
On stock has a market capitalization of $12 billion and trailing-12-month revenue of $2 billion. Tripling would turn that into a market cap of $36 billion and revenue of $6 billion. Keeping the average price-to-sales ratio of 7.7 constant over the next six years implies a CAGR of 21%. Management expects annual sales to increase 26% annually through 2026, so that also looks very possible.
On has a large market opportunity and runs a great business, making it a great growth stock to add to your portfolio.
— Jennifer Saibil
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Source: The Motley Fool
