Like every other investor, when I buy a stock I'm looking for it to move higher. I can't know with absolute certainty that will happen, though. And just how much or how quickly the stock will increase is always a guess.
However, it's easier to make predictions for some stocks than it is for others. When a given stock has tremendous growth prospects and an attractive market cap, I have more confidence that it can deliver great returns over a relatively short period. Here are three stocks meeting those two criteria that I fully expect to double or more within the next five years.
DermTech (DMTK 2.05%) might scare off some investors because of its volatility. The healthcare stock soared 145% year to date by late February only to give up much of those gains. In my view, it's best to ignore the short-term volatility and focus on DermTech's long-term prospects.
The company markets two genomics tests for detecting melanoma called Pigmented Lesion Assay (PLA) and PLAPlus. With these tests, an adhesive patch is placed over a suspect area of skin. The patch is then removed and sent to DermTech's lab for genetic analysis.
DermTech's tests are 17 times less likely to miss a melanoma diagnosis than the current method of obtaining a tissue biopsy and sending it to a lab for histological analysis. The cost of the PLA skin genomics test is also nearly 25% less expensive than the current approach.
It's still in the really early innings for DermTech. Not every insurer covers the company's tests yet. Many dermatologists aren't familiar with the tests. DermTech is also still developing similar tests for other skin cancers.
But I predict significantly increased payer coverage and dermatologist adoption as well as success for the company in launching new products over the next few years. With DermTech's market cap currently at around $1.2 billion, I think this stock has a great chance to double and perhaps deliver a much higher return.
The Motley Fool recently revealed 20 of its highest-conviction stock and fund picks that are in a great position to make investors money over the next five years. Etsy (ETSY -1.35%) ranked as the second smallest stock on the list with its market cap close to $25 billion. I also have a really high conviction about Etsy's potential.
There's no doubt in my mind that online shopping will grow over the next several years. I think that Etsy will grow even faster than the overall e-commerce market. That was definitely the case in 2020, with Etsy's gross merchandise sales soaring 2.5 times faster than the U.S. Census Bureau's e-commerce industry benchmark.
In my opinion, there's one main reason this trend is likely to continue: Etsy's uniqueness. The company's platform features many one-of-a-kind handcrafted products that you simply can't find anywhere else. This differentiation has helped make Etsy the fourth-largest e-commerce site in the U.S. based on monthly visits.
Etsy could realistically double by focusing only on the $100 billion market for what it calls "special" products. However, the company is also targeting a broader e-commerce market that's much bigger. I look for Etsy to continue gaining market share and provide investors who buy and hold the stock huge gains over the next few years.
Gores Holdings VI
I'm not usually a fan of special purpose acquisition company (SPAC) stocks. However, Gores Holdings VI (GHVI) is an exception. I really like the prospects for the company that this SPAC plans to soon merge with -- Matterport.
Matterport stands as the leader in creating 3D "digital twins" of buildings. It has created the world's biggest library of these 3D models with more than 10 billion square feet of space digitized. Matterport generates revenue primarily through a software-as-a-service model.
The company estimates its total addressable market is close to $240 billion. The opportunities for its technology include facilities management, insurance pricing, interior design, and real estate marketing.
Gores Holdings VI and Matterport expect the combined company will have a market cap of around $2.9 billion after their merger closes. That might seem like a steep valuation considering that Matterport made only $86 million in sales last year. However, the company thinks it could generate nearly six times that amount by 2025. If it even comes close to that goal, this SPAC stock should easily double or more within the next five years.