The main aim of investing is to grow your money over time and at a rate above inflation. An effective method of doing so is to deploy your cash into companies that display strong growth catalysts and durable competitive advantages. Some of those might be leaders in their industries, while others may have latched onto multiyear booms that are providing them with sufficient fuel for many years of steady growth.
Such companies will display consistent revenue and net income growth, translating into capital gains for patient investors. Investors may also enjoy a bonus in the form of increasing dividends over the years. The combination of higher profits and rising dividends is a potent one, and will lead to impressive share price gains for the astute investor.
Here are two stocks that possess a mix of favorable tailwinds and strong catalysts that should enable them to deliver major gains to investors.
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Peloton Interactive
Peloton Interactive (PTON 4.29%) sells exercise equipment and provides an interactive fitness platform for members. Its business model is powered by recurring subscription revenue and the sale of fitness equipment, and it has seen demand go through the roof as the pandemic has turned tens of millions of people into telecommuters and severely reduced access to gyms and other outside-the-home exercise options. Business was so good that Peloton had trouble fulfilling orders in a timely manner during its fiscal 2021 first quarter, which ended Sept. 30.
Fitness subscriptions, a key driver of recurring revenue for the company, more than doubled year over year in the fiscal first quarter from 562,000 to 1.3 million. Total workouts quadrupled from 19.2 million a year ago to 77.8 million, and Peloton's member base more than doubled from 1.6 million to 3.6 million.
Subscription revenue has more than doubled year over year while the sale of fitness products more than tripled, allowing the company to report net income of $69.3 million versus a net loss of $49.8 million a year ago.
The icing on the cake: Peloton just announced it will acquire Precor, a commercial fitness equipment provider, for $420 million. This opportunistic purchase not only gives it around 625,000 additional square feet of manufacturing capacity in the U.S. that may help it in its efforts to keep up with demand, but it also provides Peloton with an entry into the commercial fitness equipment market. The deal will enable the company to serve a greater range of customers and should accelerate its already-impressive growth.
MercadoLibre
Growth in the e-commerce and online payment spaces was already humming prior to 2020, but their growth rates have accelerated significantly since the onset of the pandemic. One major beneficiary of the crisis-generated tailwind is MercadoLibre (MELI 3.09%), Latin America's largest e-commerce player. Its merchandise and payment volumes have ballooned as people shifted more of their shopping online due to lockdowns and social distancing, and its revenue and net income have soared.
In the third quarter, the number of unique active users on its e-commerce platform jumped by 92.2% year over year to 76.1 million, while gross merchandise volume jumped by 62.1% to $5.9 billion. Total payment volume through its Mercado Pago platform soared 92% to $14.5 billion, in line with a doubling in the number of items sold. Mercadolibre's mobile wallet saw a 380% year-over-year jump to $3.2 billion worth of transactions, and its consumer base more than doubled to 13.7 million unique payers.
Not only is it the dominant e-commerce company in its region, it's vertically integrated -- handling everything from sales and online payments to shipping and fulfillment of orders. As such, MercadoLibre stands to gain further from structural shifts in user behavior catalyzed by the pandemic. While its stock price has nearly tripled this year, that may just be the beginning of a multiyear growth phase for MercadoLibre as it continues to offer convenience and security to its customers.
