Growth stocks can make you rich. Companies that grow their sales and profits quickly often create tremendous wealth for their investors over time.
The challenge, of course, is being able to identify which businesses will expand their revenue and earnings at exceptionally high rates for many years. One proven way to do so is to find trends that are powerful enough to boost the growth of even the largest industries -- and the companies best-positioned to profit from them.
Here are five excellent businesses with particularly strong growth drivers that are poised to deliver handsome returns to their shareholders in the coming years.
The coronavirus pandemic has accelerated the migration of retail sales to online channels. Shopify (NYSE:SHOP) is positioned at the vanguard of this global megatrend. More than 1 million businesses use Shopify's tools to power their online operations.
E-commerce sales are booming. Shopify's gross merchandise volume -- essentially, the total amount of sales that merchants generated on its platform -- soared 109% year over year to $30.9 billion in the third quarter. Shopify's revenue, in turn, surged 96% to $767 million.
More good times lie ahead for Shopify and its investors. Merchants made 76% more sales on its platform during the Black Friday to Cyber Monday holidays shopping period than they did last year. This bodes well for Shopify's upcoming fourth-quarter results, as well as the online-retail star's long-term growth.
Like Shopify, Square (NYSE:SQ) offers investors a means to profit from the growth of e-commerce. Square is helping its merchant customers transition their physical retail stores -- many of which were forced to close during the early stages of the COVID-19 crisis -- to the internet with website-building tools and other online-store solutions.
Square is also a great way to profit from the trend away from cash and toward digital transactions. Its core credit and debit card processing services have long runways for growth still ahead. Its peer-to-peer payment application Cash App is also growing rapidly. And Square has become a popular way to buy and sell cryptocurrency, which gives its shareholders a relatively safe way to cash in on the crypto boom.
Digital transformation is another megatrend that investors would be wise to consider. COVID-19 and the social-distancing measures enacted to combat the disease have driven more businesses to digitize their operations and shift them to the cloud. No company is better-positioned to profit from this trend than Salesforce.com (NYSE:CRM).
Salesforce is the leading provider of cloud-based customer relationship-management software. Its cloud software solutions are well-suited for distributed workforces -- an important consideration for the many businesses that are embracing the work-from-home trend during the pandemic.
Salesforce's acquisition of MuleSoft in 2018 made it a leader in data integration, a field that's becoming more important every day as companies seek to aggregate and analyze data from an ever-expanding array of sources. Its acquisition of Tableau in 2019 made Salesforce a leader in data visualization, thereby helping its customers better see and understand their data. And just days ago, Salesforce agreed to buy Slack Technologies (NYSE:WORK), a leading workplace-communications platform that should provide the cloud titan with another powerful growth driver.
Like cloud computing, online gambling is a potential fortune-building opportunity for investors. Sports betting could become a $58 billion industry in the U.S. alone, according to investment bank Needham. And the best wager to make in this rapidly growing market is to buy DraftKings' (NASDAQ:DKNG) stock.
The fantasy-sports and online-sportsbook company's revenue rocketed 98% higher in the third quarter, fueled in part by a 64% jump in active users. DraftKings is expanding aggressively into new markets as more states legalize online sports betting. The company has signed deals with a host of sports leagues, teams, and networks -- including Major League Baseball, the New York Giants, and ESPN -- which helps to keep its brand front and center in the minds of bettors.
Maryland, South Dakota, and Louisiana recently approved measures to legalize bets on sporting events. With more states likely to legalize online gambling in order to help repair their coronavirus-damaged tax revenue bases, DraftKings has plenty of room for further expansion.
Electric vehicles (EV) are one of the most exciting growth trends of the next decade, not only for the investment angle but also for the potentially significant positive impact they could have on the environment. Investors searching for a great way to profit from this game-changing industry's long-term growth need look no further than Tesla (NASDAQ:TSLA).
Tesla's recent share-price gains are allowing it to raise the capital it needs to accelerate its growth. The EV leader recently filed to raise an additional $5 billion in cash via a share offering. This will help to shore up Tesla's balance sheet, thereby reducing the risk for investors.
Tesla should thrive as electric-vehicle adoption accelerates and battery prices fall in the coming years. Meanwhile, Tesla's profit margins are set to increase as it scales the production of its new Model Y sports-utility vehicle. Rapidly growing sales, coupled with margin expansion, could fuel Tesla's growth -- and, by extension, its returns to its shareholders -- for many years to come.