2 Growth Stocks That Could Double in the Next 5 Years

Considering today's financial and macroeconomic conditions, it doesn't look like any growth stocks will be doubling soon. But the nature of sound equity investing is being able to look past what's in front of your nose and think about long-term potential. So while short-term pressures are playing out in a volatile economy, many growth stocks' future prospects are solidly intact.

Dutch Bros (BROS -1.46%) and MercadoLibre (MELI -1.16%) are two excellent stocks whose prices could double or more over the next five years.

1. Dutch Bros

Dutch Bros operates a chain of nearly 600 coffee shops in 12 U.S. states, so chances aren't high that you've visited one unless you live in the Western part of the country. It has distinct branding that sets it apart from other coffee shops and chains, with a strong focus on customer service and a fun environment.

Revenue increased 54% year over year in the first quarter, although most of that came from new store openings. At a time when consumers are reining in spending, comparable sales (comps) increased only 6% vs. last year. Inflation also impacted profitability, and net loss widened from $4.8 million last year to $16.3 million this year.

The short-term pressure isn't going to disappear tomorrow. But Dutch Bros has a large long-term growth opportunity. Its successful model has been replicated as it continues to open stores at a steady pace, and it sees a market for 4,000 stores over the next 10 to 15 years. Store count should easily double over the next five years, adding a lot more revenue and potentially swinging the company over to a profit, and the stock is likely to follow suit.

The question, though, is whether its model can be copied to other areas across the country. A company like Texas Roadhouse, for example, has an excellent operating model with satisfied customers, but it hasn't penetrated many areas in the Northern U.S. It is making strides moving north, though, and Dutch Bros may be able to down the line as well.

Dutch Bros stock is down 26% this year, and it looks like a compelling buy at this price.

2. MercadoLibre

Considering that MercadoLibre stock was at more than double its current price just last summer, it stands to reason it could easily surpass that over the next five years. Throughout the year, it has continued to post impressive growth and upgrade its business in many ways.

MercadoLibre is a hybrid e-commerce and fintech company. Its main business is its online shopping portal, similar to Amazon's. But it also operates a digital payment business, along with credit products that developed out of the need to offer payment options for a highly underbanked Latin American market. This dual focus, along with its first-mover's edge, gives it an unparalleled lead in the 18 Latin American countries in which it operates.

Revenue in the first quarter of 2022 increased 67% year over year on top of a 158% increase last year. Gross merchandise volume increased 32%, and items per buyer rose as well. Total payment volume (TPV) grew 81% and reached a record $25 billion.

Fintech is playing a more important role than ever in the company's growth. MercadoLibre increased its credit portfolio by more than $7 billion from Q1 2021 to a total of more than $2.4 billion, with a mix of commercial and personal loans as well as credit cards. Management previously said that it would adjust its fees to account for inflation and rising interest rates, and that proved pivotal this quarter as the adjusted rates took effect and improved profitability. With increased TPV, increasing numbers of account holders, and a growing off-platform business -- digital payments not used on the MercadoLibre platform -- fintech will continue to be a huge growth driver.

Granted, in the macro environment, the company is expending more cash to convert sales and having a more challenging time squeezing out profits from its operations. But it's making progress, and it posted $65 million in net income in the first quarter of 2022 after losses in the first and fourth quarters of 2021.

MercadoLibre stock is down nearly 40% this year, but it could be worth double or more in five years.