While looking at historical growth rates and stock price success doesn't necessarily indicate future outperformance, it can be a compelling starting point when looking for new investment ideas.
This strategy is particularly true when a company's growth rate accelerates over time, which is the case for these three companies. Despite posting blistering annualized revenue growth between 39% and 74% over the last five years, these businesses have each posted even higher figures this last year -- making them three of my top growth stocks to consider buying now.
1. MercadoLibre
Despite being known as Latin America's Amazon, MercadoLibre (MELI -1.98%) is rapidly beginning to look more like a fintech company that happens to sell products online.
Posting overall revenue growth of 65% year over year for the first quarter of 2022, MercadoLibre saw an intriguing juxtaposition between its two core reporting segments: commerce and fintech. During this period, its commerce unit grew by 44%, while fintech posted a 113% spike.
Thanks to this incredible growth, the fintech unit now accounts for 43% of MercadoLibre's total sales -- up from 34% just a year ago.
This burgeoning unit is vital to investors, as it doesn't take a giant imaginative leap to remember when eBay and PayPal Holdings were together a decade ago and realize the similar potential MercadoLibre's fintech unit may offer investors. After being spun off from eBay, PayPal rose as high as 700% in the following six years before falling during the recent tech sell-off.
Best yet for investors, MercadoLibre's incredible growth is available at a deeply discounted price.
With its share price down around 50% year to date, the company's price-to-sales (P/S) ratio has dipped to never-before-seen levels.
MELI PS Ratio data by YCharts
Another way to reframe this P/S mark is to think that if MercadoLibre someday reaches a consistent 5% profit margin, this P/S of 4.3 would equate to a price-to-earnings (P/E) multiple of 87.
While this may still sound somewhat expensive, remember that analysts expect the company to grow sales by 50% this year, which would push MercadoLibre's P/S below three -- an incredible valuation for such a rapidly growing business.
Despite MercadoLibre forgoing current profitability in favor of building out its broader marketplace, fintech, logistics, and credit ecosystem, it is clear that today's valuation is quite tempting compared to its massive long-term cash flow potential.
2. Celsius Holdings
Seemingly doing the impossible and fusing the worlds of energy drinks and health and wellness, Celsius Holdings (CELH -1.41%) has exploded onto the market, rising over 20,000% in the last decade.
Supported by several clinical studies that show its drinks and on-the-go powder help burn up to 140 calories per 12-ounce serving, Celsius has delivered annualized sales growth of 74% over the last five years. Incredibly enough, though, this growth accelerated to 167% companywide during the first quarter of 2022 -- with an even higher mark of 217% domestically.
Leading this charge was an 88% increase in convenience store locations, which helped grow its total door count by 53% to over 140,000 in the United States. Thanks to this incredible growth, Celsius now holds a 4% share of the U.S. energy drink market, which should grow by around 7% annually over the next five years.
As impressive as this market share is for such a young upstart company, its 18% market share in energy drinks sold on Amazon is second only to Monster Beverage and its 26% share.
While Celsius trades at 16 times sales, its mind-boggling growth rates and newfound profitability show that it could quickly grow into its outsized valuation.
CELH EPS Diluted (TTM) data by YCharts
Quite frankly, any profitability is rather impressive, considering the company's extraordinary growth -- making Celsius's long-term growth prospects all the more alluring.
3. Xpel
With its shares rising over 40,000% in the last 10 years, it is fair to mistake Xpel (XPEL -1.26%) for a bleeding-edge biotech stock or a booming software-as-a-service unicorn. However, this would be incorrect, as Xpel is the leader in the glamorous (and seemingly wildly profitable) world of protective films.
Since 1997, Xpel has built a $1.5 billion company on a unique niche through its protective film, automotive window tinting, and residential and commercial window tinting. In addition to offering these products, the company provides installation services and certified training to use its design access program, allowing for precut films for almost all car models.
With operations in nine countries, Xpel has started its global expansion but is still in the very early innings, with North America accounting for around 70% of total sales.
On the financial side, Xpel has seen beautifully balanced growth between sales and earnings per share, with the two metrics rising over 2,700% since 2012.
XPEL Revenue (TTM) data by YCharts
Best yet for investors, despite a recent run-up in its P/E ratio during 2020 and 2021, Xpel's valuation has been cut in half from its highs -- leaving this high-growth company trading at a fair price.
XPEL PE Ratio data by YCharts
Thanks to this freshly lowered valuation, a highly fragmented market globally, and the company's ambitions to grow its nonautomotive business, Xpel looks poised to continue its stock's incredible growth story over the long haul.
