While looking for stocks to quadruple over the next eight years may sound overwhelming, the 19% annualized growth rate that this equates to makes it seem much more reasonable. Furthermore, by exploring the intersection of solid moats, high sales growth rates, and budding profitability, we can find companies that have positioned themselves beautifully for the long term.
Today we will look at five stocks that fit this billing nicely, having the potential to quadruple by 2030 -- and that may only be the start.
Image source: Getty Images.
1. Roku
Led by its founder Anthony Wood, streaming juggernaut Roku (ROKU -3.05%) has seen its share price tumble around 50% in the last six months. However, before this drop, the young company had risen over 1,500% since its 2017 IPO, as it quickly shredded its image as a streaming hardware company.
With an active user base of over 56 million accounts, Roku is turning its attention to monetization through content distribution and advertising on its platform. Recording $583 million in platform revenue during the third quarter, the company grew its core operating segment 82% year over year, fueled by the fact that total monetized ad impressions almost doubled for the quarter.
Furthermore, Roku ended its standoff with Alphabet and its YouTube segment, reaching a multi-year deal to allow the latter's apps to remain on Roku's platform. While the underlying financial effect of this is good news for investors, the even better bit is that it shows the company's growing strength within the streaming ecosystem.
As we go forward, it will be pivotal to watch Roku's average revenue per user (ARPU) growth, which was up 50% year over year during Q3. Should ARPU continue growing at such a high rate due to advertising strength, Roku may become a four-bagger well before 2030.
2. Teladoc Health
Despite sporting a Net Promoter Score (NPS) of 52, telehealth specialist Teladoc Health (TDOC -1.52%) has seen its stock plummet by over 60% in 2021 compared to its all-time highs.
NPS is an excellent tool for quantifying how likely a company's customers are to recommend its products to others. On a scale of -100 to +100, a positive score represents satisfied customers -- meaning that Teladoc's products are beloved by its users.
With over 76 million paid members, the company has already built a solid customer base but has only begun to tap into the massive $260 billion total addressable telehealth market. With sales of nearly $2 billion over the last year, this growth runway for the company is tremendous, especially with the industry still mainly in its infancy.
One primary key for investors to watch as Teladoc evolves is to track the ongoing development of its mental and chronic care health segments. Thanks to the company's past acquisitions of Better Help in 2015 and Livongo in 2020, these two segments already account for nearly two-thirds of sales and should drive the lion's share of future growth.
As Teladoc continues to digest and streamline the Livongo acquisition, it will be pivotal to see operating cash flow continue to improve to drive future share price performance.
3. Etsy
Driven by its mission to "keep commerce human," personalized e-commerce site Etsy (ETSY -0.86%) has grown one of the most robust company cultures in the U.S. -- boasting a 4.6 out of five-star rating in employee reviews on Glassdoor. Additionally, CEO Josh Silverman received a 98% approval rating from his employees, which, when paired with Etsy's 4.6-star rating, indicates a great workplace environment.
Its one-of-a-kind culture is vital to Etsy investors, as this uniqueness flows into its product inventory and, ultimately, out through its display pages and overall shopping experience.
With gross merchandise sales rising 18% year over year for Q3, despite already having jumped 119% a year ago, the company proves that its long-term story is still unfolding despite the pandemic pulling significant growth forward.
Perhaps best yet for investors, Etsy has generated nearly $600 million in free cash flow over the trailing 12 months (TTM), giving it a price-to-cash flow of only 48. This 48 times valuation looks deeply discounted when thinking eight years forward, especially considering the immense potential of the company's recent acquisitions of international-facing elo7 and Depop.
Keep a close eye on this free cash flow number quarter to quarter, as Etsy could quickly outgrow its discounted valuation.
4. MercadoLibre
The biggest company of our group, Latin American e-commerce behemoth MercadoLibre (MELI -1.01%), boasts a trifecta of great numbers right out of the gate: An NPS of +45, employee reviews of 4.4/5 stars, and an approval rating of 94% for CEO Marcos Galerpín.
Thanks to this strong culture and loyal customer base, the company has quickly developed a leadership position in Latin America, accounting for roughly 25% of all online purchases made in the area. In addition to this sales leadership, Euromonitor released a report announcing that over 900,000 families use MercadoLibre's platform as their primary source of income, highlighting how deeply ingrained into the fabric of the community it has become.
With 79 million active members, the company posted a 117% increase in gross merchandise volume year over year for Q3 -- yet that is far from its only growth option.
During Q3, MercadoLibre nearly quadrupled its Mercado Credito portfolio originations year over year to $1.1 billion while growing its total payments volume in Mercado Pago by 59% over the same time.
It will be fun to watch these two segments dive deeper into the fintech space -- but it will be critical for MercadoLibre to do so cautiously, as a poorly performing credit portfolio could weigh on its growth story.
5. Axon Enterprise
Operating through its simple mission of "to protect life," Axon Enterprise (AXON -1.34%) also owns very high NPS marks, recording a score of +56. Considering its well-known TASER products, this high score is understandable, as they are a non-lethal solution to what may otherwise be high-risk situations for police officers.
However, Axon is quietly writing a growth story that goes far beyond simply selling taser hardware. In fact, it already has a nearly 50/50 split between taser sales compared to its Axon Cloud and Sensors and other segments as of Q3.
Growing by 39% for the quarter, year over year, its Axon Cloud unit is quickly becoming the golden goose within its operations, providing recurring revenue and an incredible gross margin of roughly 75%.
These cloud sales come from Axon storing its customers' body camera video footage on evidence.com, giving law enforcement agencies a priceless database of evidence to use and accelerate justice.
As Axon evolves into a true software-as-a-service (SaaS) company and becomes a modern-day razor-and-blades company, investors will need to watch for improving free cash flow generation. Trading at roughly 100 times its free cash flow, Axon will need to see steadily improving margins from its budding SaaS operations to quadruple its share price by 2030.
