Finding long-term market winners is not that complicated. The companies that deliver wealth-building gains over many years have a record of high rates of revenue growth, which is validated by rising stock prices. The only cost for an investor is patience and tolerating the occasional market dips along the way.
Here are two businesses I'd like to discuss that can bring life-changing returns to your retirement account.
NASDAQ: SHOP
Key Data Points
1. Shopify
Like many growth stocks, Shopify (SHOP +1.29%) stock experienced a sharp correction in 2022, but the stock has quickly bounced back, up 54% this year, as merchants continue to lean on the company's leading e-commerce solutions. The share price has returned 2,000% since its initial public offering (IPO) in 2015. The company's double-digit annual growth and stock performance is pointing investors to a massive long-term opportunity.
With trillions in consumer spending moving online, more merchants are turning to Shopify to help them open and manage online storefronts. The value of all goods processed over its platform, or gross merchandise volume, hit $55 billion in the second quarter, up 17% year over year.
Shopify has huge potential with new offerings powered by artificial intelligence (AI). It has already released an AI assistant called Sidekick, which is currently in early access. It's basically an AI chatbot that can suggest ideas, automate tasks, and assist with other operations.
Sidekick could be a game changer. Shopify already has a ton of momentum heading into 2024 as new merchants continue to sign up. Revenue from subscription solutions grew 21% year over year in the second quarter. Management expects to report full-year revenue growth in the low-20s range.
The stock trades at a high price-to-earnings ratio, but the share price is 70% off its previous peak. After reporting slowing growth last year as inflation heated up, Shopify appears to be back on track. Further innovation with its platform should keep its momentum going and push the stock higher over the next decade and beyond.
NYSE: BJ
Key Data Points
2. BJ's Wholesale Club Holdings
Investing in growing discount retailers while they are small can be very rewarding over many decades. Over the last four decades, a $1,000 investment equally divided between the stocks of Walmart, Target, and Costco Wholesale would have returned a combined $384,000. BJ's Wholesale Club Holdings (BJ 2.73%) could join this elite group one day.
Like Costco, BJ's operates a warehouse member model, but it has a smaller store footprint, primarily operating on the East Coast. With only 238 clubs, 168 gas stations, and 7 million members, BJ's has a lot of room for growth.
The stock has more than tripled since its IPO in 2018. Even during a challenging retail environment, comparable club sales, excluding gas sales, increased by 1.1% year over year in the quarter ending July 29. Despite high inflation, the company has kept prices low, which is winning traffic and market share.
As the company expands, it is delivering profitable growth. Adjusted earnings were down 8.5% last quarter, but over the last three years, revenue and earnings are up 34% and 71%, respectively.
To follow in the footsteps of industry leaders, BJ's will have to prove it can expand into general merchandise. So far, so good. It reported healthy sales of small appliances last quarter, in addition to strong back-to-school sales. BJ's e-commerce business also posted a comparable sales increase over the year-ago quarter of 15%, which is better than Costco's recent decline in this area.
At a forward P/E of 17.8, the shares could be undervalued, as most growth stocks trade at over 20 times earnings. BJ's looks like a no-brainer for long-term investors.
