A $10,000 investment in the right growth stocks could deliver life-changing returns over the next decade. Consider that semiconductor specialist Nvidia has delivered a return greater than 7,740% over the last 10 years, good enough to turn a $10,000 initial investment into more than $774,000.
If you're looking for stocks that are capable of creating a fortune within the next decade -- and provided that you already have your financial bases covered and an emergency fund in place -- it makes sense to look at companies that are still relatively small because relative growth is easier to deliver.
With that in mind, read on for a look at two stocks with market capitalizations under $5 billion that have the potential to deliver explosive returns over the next decade.
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1. StoneCo
StoneCo (STNE +0.14%) is one of the top providers of payment-processing services for small- and medium-sized businesses (SMBs) in Brazil. While the company was positioning itself to also be a top provider of credit services to businesses in that category, that didn't exactly go as planned.
StoneCo had been relying on Brazil's national registry system to determine whether SMB applications were creditworthy, but the coronavirus pandemic and other macroeconomic headwinds resulted in the company taking a loss on many of its loans. Even after discharging or selling bad credit at basement-level prices, the financial services company still carries roughly $79 million in bad debt.
Due to the implosion of the lending business and other macro pressures, the company's share price is down roughly 85% from its high. But it's time for investors to pounce on this beaten-down stock.
NASDAQ: STNE
Key Data Points
While the credit unit has been an albatross around the neck of the company's valuation over the last couple of years, StoneCo's core payment-processing segment has continued to serve up great results. The company's revenue actually grew 44% year over year in its fourth quarter, and the business posted a non-GAAP (adjusted) profit of $46.4 million in the period. Even better, the company appears to have taken steps to right the issues with its credit business and is gearing up for a relaunch this year.
Valued at roughly $4.3 billion, StoneCo currently trades at roughly 21 times this year's expected earnings and less than 1.9 times expected sales. Given that the company has been growing sales and earnings at a rapid pace and still has a long runway for continued expansion, shares present a very attractive risk-reward profile for investors seeking stocks that can serve up huge returns over the next decade.
2. Appian
Appian (APPN 5.25%) provides a low-code development applications platform that makes it possible for users to build, launch, and modify applications without having coding knowledge. Using a drag-and-drop approach to building block and flowchart-style development, the company's software allows businesses and institutions to create apps for automating and improving workflows without the need to hire dedicated internal-development teams or third-party contractors.
Even with macroeconomic headwinds creating pressure for many software companies, Appian has continued to serve up strong business results. The company's revenue rose 18% year over year to reach $135.2 million, and cloud subscription sales increased 31% to reach $69.7 million. The low-code specialist is now making a big push to bring advanced artificial intelligence tools to its platform and is in a good position to pursue long-term growth initiatives.
While the business isn't posting profits yet and recorded a net loss of $36.8 million last quarter, Appian has a solid balance sheet to work with and the flexibility to sell new shares, if needed. The company ended Q1 with $254.5 million in cash against zero debt. Its roughly 73% gross margin last quarter suggests a feasible path to shifting into profitability and delivering earnings growth as the business continues to grow and sales and marketing spending decline as a percentage of overall revenue.
NASDAQ: APPN
Key Data Points
Appian also appears to be on track to receive a substantial financial windfall, stemming from its trade-secret misappropriation lawsuit against rival Pegasystems. While the suit is now going through the appeals process, Appian received a $2 billion judgment against its competitor last May when a jury found that Pegasystems had used a contractor to wrongfully gain access to proprietary information.
Down roughly 85% from its lifetime high and currently valued at roughly $2.6 billion, Appian is a company that could deliver explosive gains for patient investors. Whether or not the company winds up collecting the full judgment from its lawsuit, it's posting encouraging business results, and the successful integration of generative AI technologies into its platform could take performance to the next level.
