If you have at least five years to invest and know what to look for, you have a good chance of doubling your money in the stock market. The trick is to identify growing companies the market is overlooking, or undervalued growth stocks.
Two promising candidates right now are SentinelOne (S 1.70%) and Toast (TOST 3.42%). These companies are growing fast, but near-term worries about the economy have sent them more than 70% off their previous highs.
Both stocks trade for less than $25 per share, so it doesn't matter how much you have to invest. You could buy one share of each with only $50. And here's why these stocks could double your money.
SentinelOne
Investing in high-growth companies can make it easier to land a two-bagger, so you know you're hunting in the right place when all the leading cybersecurity companies are growing their revenue at high rates.
CrowdStrike, Zscaler, and SentinelOne are some of the top names in the industry. CrowdStrike and Zscaler have nearly tripled their revenue since the end of 2020, but SentinelOne has grown much faster, and its latest earnings results show why the stock could be on the verge of a rebound.
Data by YCharts.
It added 700 new customers in its fiscal 2024 second quarter (ended July 31), including several large wins in the U.S. government, healthcare, and technology. SentinelOne is proving it has the technology to adequately meet the needs of large enterprises that need to secure sensitive data on endpoint devices and the cloud.
Annualized recurring revenue grew 47% year over year, and management is also executing solid cost discipline. The company is on pace to cut its adjusted operating loss margin in half this year with a gain of 24 percentage points. A path to profitability could be just what the stock needs to put together a strong rally going forward.
Over the long term, SentinelOne should continue to gain share of a massive addressable market that management estimates at $100 billion, and patient investors should be well rewarded.
Analysts expect revenue to grow over 30% per year over the next three years. This is what investors want to see because doubling in five years requires an annualized growth rate of about 15%. Invest in companies that are growing much faster than that, and you increase your chances of hitting your target.
Toast
Another top choice with two-bagger potential is restaurant software provider Toast. It offers software that streamlines order management, payments, and other operations. More restaurants are starting to upgrade their technology systems, and this is driving tremendous growth for Toast.
Revenue has exploded from $665 million in 2019 to $2.7 billion in 2022. In the most recent quarter, its top line was up 45% year over year, and management expects full-year revenue to reach approximately $3.4 billion.
Dining out has been gaining in popularity for many years. Sales from food service and drinking have increased almost every year over the last 30 years. The only years sales didn't increase were 2009 and 2020 when consumer spending was pressured by difficult economic conditions. Industry sales in the U.S. have soared following the reopening of the economy, reaching $975 billion in 2022, up from $843 billion in the previous year, according to data from Statista.
Toast clearly has a big tailwind at its back that is driving strong growth, but the company is also gaining market share. The gross payment volume on its platform increased 38% year over year to $32.1 billion in the second quarter.
Toast is adapting its platform to meet the specific needs of different restaurant operators. For example, it recently introduced new solutions for hotels, cafes, and bakeries. It has already signed a deal with Marriott International's Select service hotels in the U.S. and Canada too.
The market has punished the stock over worries about a slow consumer spending environment potentially harming restaurant sales, impacting the payment volume processed on Toast's platform. The company also just announced a new CEO, which always creates some uncertainty. However, Toast should be in good hands with co-founder and Chief Operating Officer Aman Narang set to take over as CEO at the beginning of next year.
Considering Toast's momentum and massive opportunity in the industry, the stock appears undervalued at a price-to-sales ratio of 2.9, which is only a small premium over the broad-market average.
