Last year's downturn hit growth stocks especially hard, but many growth-oriented corporations performed impressively regardless. Two companies that belong to this group are Novo Nordisk (NVO 0.84%) and MercadoLibre (MELI 3.09%). These stocks' performances over the past year haven't been flukes; both companies have excellent prospects and could deliver solid financial results and outsized returns in the next decade. Let's look closer at what makes Novo Nordisk and MercadoLibre such great buys.
1. Novo Nordisk
Novo Nordisk is a leading Denmark-based drugmaker. Like many of its peers, the company should benefit from increased spending on prescription medicines we are likely to see in the next decade and beyond due to an aging population. Novo Nordisk specializes in diabetes care, an area with an increasing need for therapy options.
Novo Nordisk's portfolio includes such products as diabetes treatment Ozempic, as well as weight loss medicines Wegovy and Saxenda. As of February, the company held a 32.2% share of the diabetes care market, up from the 30.5% it had a year ago. In the first quarter, Novo Nordisk's net sales of 53.4 billion Danish Kroner ($8.1 billion) increased by 27% year over year.
The company's net profit of 19.8 billion DKK ($2.9 billion) was 39% higher than the prior-year quarter.
A recent report from Bloomberg Intelligence predicted that anti-obesity drugs could generate $44 billion in risk-adjusted sales by 2030, up from just $2.5 billion in 2022. Wegovy and Saxenda will likely be among the biggest winners, so we can expect these drugs to fuel steady growth for Novo Nordisk's top line. But the company continues to innovate, too.
Novo Nordisk's next blockbuster could be icodec, a once-weekly insulin option. Diabetes patients currently take insulin daily, so it's not difficult to see the opportunity here. Novo Nordisk has many more programs in its pipeline beyond its central areas of diabetes and obesity. So, in addition to expanding its core portfolio, the company should also earn brand-new approvals for medicines in other therapeutic fields.
This should all continue to bolster revenue and earnings. Novo Nordisk has succeeded in beating the market lately because of its bright prospects, but there is plenty of upside left for investors willing to hold the company's shares through the next 10 years.
2. MercadoLibre
MercadoLibre is sometimes called the Amazon of South America. That's a flattering moniker, considering how successful Amazon is. However, it doesn't do the company justice. MercadoLibre's business extends far beyond e-commerce and into fintech through its digital payment platform, Mercado Pago, and its business credit solution service, Mercado Credito.
The company does even more than that; it helps merchants create online storefronts from scratch (Mercado Shops) and also boasts a logistics arm (Mercado Envios). So MercadoLibre practically combines some of the core functionalities of Amazon, PayPal, and Shopify. The complementary nature of its ecosystem arguably grants MercadoLibre a competitive edge from several sources.
First, its platform rises in value with usage. The more that merchants are on its e-commerce website, the more it attracts customers, and vice-versa. This is an excellent example of the flywheel effect. Second, MercadoLibre benefits from high switching costs. Once merchants have established an online presence thanks to the company's suite of services, jumping ship won't be easy.
MercadoLibre has continued to deliver solid financial results of late. In the first quarter, the e-commerce specialist recorded net revenue of about $3 billion, an increase of 35% year over year. The company showed progress on many other fronts, including gross merchandise volume, unique active users, and its fintech's arm total payment volume.
And on the bottom line, MercadoLibre's net earnings per share of $3.97 tripled from the $1.30 reported in the prior-year quarter. MercadoLibre's excellent financials are likely one of the reasons behind its market-beating performances of late. There could be more where that came from.
MercadoLibre should remain the dominant e-commerce platform in Latin America for a while thanks to the ecosystem, competitive advantage, name recognition, and extensive footprints throughout the regions it has already built. It's difficult to see competitors toppling the tech giant in the next decade.
That's why the stock is a buy. Investors who go along for the ride could see outsized returns.
