Maybe you've dreamed of turning a $10,000 investment into $50,000 but worry it will take too long. In fairness, quintupling your money in the stock market normally does take a long time and there's no guarantee you can make it happen. For example, if you invested $10,000 in an S&P 500 index fund in March 2009 -- nicely timing the bottom of the Great Recession bear market -- it would be worth $50,000 right now over 13 years later.
However, restaurant chain Chipotle Mexican Grill (CMG 1.07%), advertising technology company The Trade Desk (TTD 4.15%), and beverage company Celsius Holdings (CELH 3.21%) would have at least quintupled your money over just the past five years. And the good news for investors is these companies still have more upside opportunity ahead.
Chipotle's five-year returns: 435%
Chipotle Mexican Grill ended 2017 with 2,408 restaurant locations. That may sound like a lot, but management had its sights set much higher: It believes North America can support 7,000 locations and over the past five years, it's furiously opened new locations -- even during a global pandemic -- and now has about 3,100 open for business. The company is expecting to open up to 385 new restaurants in 2023.
What makes Chipotle unusual in the restaurant world is that its locations are all owned by the company, none are franchised. Even restaurant chains with great unit economics typically franchise locations. Consider that only 58% of Shake Shack's 402 locations are operated by the company. More extreme, only 2.2% of Wingstop locations are company-owned. By contrast, Chipotle is 100% company-owned.
This business structure adds operational risk to Chipotle. You can see that as it's had to deal with outbreaks of foodborne illnesses in the past. However, while there's risk, there's also great reward for shareholders because of the superb unit economics. The restaurants do about $2.8 million each in sales volume annually, so every new location greatly adds to the company's top line. New locations pad Chipotle's bottom line as well considering restaurant-level operating margin is north of 25% -- very high for a restaurant stock.
If you ever wanted to know why stocks go up, Chipotle stock is a great case study. Over the long term, stocks tends to follow the company's profits. And from the chart below, you can see that there's a strong correlation between Chipotle's price per share and its earnings per share (EPS).
Over the next five years, shareholders can expect Chipotle's EPS to continue growing as its opens up hundreds more of its highly profitable restaurants. I wouldn't necessarily expect a 400% return over the next five years, but I believe investors can safely anticipate positive returns.
The Trade Desk's five-year returns: 702%
They say a rising tide lifts all boats. But The Trade Desk's ship is rising higher than the rest of the advertising technology (adtech) fleet. In the third quarter of 2022, the company grew its revenue 31% year over year despite incredible headwinds in the advertising industry. And ongoing growth in this environment caused CEO Jeff Green to say that 2022 has marked The Trade Desk's greatest market share gains ever.
Gaining market share is how The Trade Desk has rapidly scaled its business and been a market-crushing investment. However, this isn't just a story about market share -- the long-term tide is certainly rising in the digital ad space.
Take one corner of the advertising ocean: video content. According to The Trade Desk, linear TV (non-internet television) is a $175 billion ad market. And according to data put together by Statista, connected-TV (CTV) ad spend will be under $19 billion in 2022. The market is growing fast as people increasingly switch to streaming. Statista expects CTV annual ad spend to roughly double by 2026 and CTV is the largest part of The Trade Desk's business.
It's not just CTV. Across the advertising industry, brands find it increasingly preferable to employ digital ads that can be better measured. Moreover, brands and ad agencies are learning of the benefits of The Trade Desk's programmatic capabilities that allow for finer tuning for targeting specific consumer demographics.
The Trade Desk should grow revenue at a steady clip thanks to ongoing market share gains and the surge of digital ads in general. The stock does trade at a lofty price-to-sales (P/S) valuation of about 17, which could limit returns as the valuation comes down over time. So don't necessarily expect 702% gains over the next five years. But as with Chipotle, I'd say The Trade Desk stock is highly likely to generate positive returns and even possibly market-beating returns.
TTD PS Ratio data by YCharts
Celsius Holdings' five-year returns: 1,510%
If you timed your way into a Celsius position a little over three years ago, then congratulations: You're sitting on even better 2,500% returns. But a $10,000 investment at prices five years ago would still be worth an amazing $161,000 today -- the best returns among these three companies. And it's all because Celsius was finally able to take its eponymous energy-drink line to the next level.
Celsius started selling its energy drink way back in 2005. However, by 2010, the company was facing possible bankruptcy and put itself up for sale. Nobody was interested in buying, but Celsius somehow pulled through. Slowly but surely the brand got greater recognition and distribution. And it's been a snowball effect that's recently reached seemingly unstoppable momentum. As of the third quarter of 2022, Celsius claims the No. 3 spot in the U.S energy drink space with 4.9% market share -- not bad for a company that nobody wanted to acquire just 10 years ago. And this hardly seems like the ceiling for Celsius' growth.
PepsiCo just signed a partnership agreement to take over Celsius' distribution and this has pumped up sales in convenience stores and other retailers.
There's much more that could be said, but I like to focus on the fact that Celsius' growth opportunities are as strong as ever. I'll again temper expectations by saying that Celsius stock will be hard-pressed to return 1,500% in the next five years. But given Pepsi's involvement with this fast-growing brand, I believe Celsius stock has the highest probability of these three stocks of beating the market over the next five years.
