For most investors, the point of buying a stake in a company is to turn a relatively small investment into a much larger sum. There are lots of ways to make that happen, and some are better options than others.
Here's a closer look at three stocks that turned a $1,000 investment into holdings worth $10,000 or more over time. Each one required a different amount of time to accomplish and each involves very different businesses. But that only serves to illustrate that you can do well for yourself with all sorts of stocks, regardless of your risk tolerance.
The big question is, of course, can any of these three names do it again in the foreseeable future?
Turning $1,000 into $10,000
Celsius Holdings (CELH 1.22%) isn't a household name. Although the energy drink brand debuted back in 2004, it didn't start gaining real traction as a product or as a stock until 2019. That was shortly after John Fieldly was named CEO, bringing something of a Midas touch to the business. Sales have soared from 2019's tally of $75 million to this year's expected top line of $1.3 billion, and the company has become quite profitable as a result. Its distribution partnership with PepsiCo helped drive much of its recent growth, although the company has yet to see the full potential of that affiliation.
This rapid expansion hasn't gone unnoticed by investors, of course. Share prices have rallied from less than $4 in mid-2020 to their current price near $150, but were as high as $200 just a couple of months ago.
NASDAQ: CELH
Key Data Points
Consumer staples powerhouse Procter & Gamble's (PG 0.19%) stock price currently stands at $152, roughly twice its price 10 years back, and three times its value from 20 years ago. You would have to have bought it all the way back in mid-2000 to have turned a $1,000 investment in this company into a $10,000 position (that return counts dividends reinvested). Still, P&G did it, far outpacing the S&P 500 over that time frame by cementing its brand names like Tide detergent and Bounty paper towels into consumers' daily routines.
Finally, technology outfit Nvidia's (NVDA 0.22%) shares have grown tenfold in value between 2019 and now. If you push your hypothetical investment start date just a little further back to the middle of 2015, however, your $1,000 investment in this company would now be worth an incredible $100,000.
NASDAQ: NVDA
Key Data Points
Investors who've kept close tabs on Nvidia since its founding all the way back in 1993 know that its first couple of decades weren't particularly thrilling. Although the company did well enough, the market for high-performance graphic processors (aka, graphics cards) wasn't exactly red-hot in this era. Then something happened. The advent of cryptocurrency mining and then the rise of artificial intelligence (AI) systems highlighted just how well-suited graphics processors are for handling large quantities of simultaneous calculations. Nvidia took that ball and ran with it, and it's now the leading name in AI hardware. That market has been the company's top growth driver for a few years now, and is now Nvidia's single-biggest business, accounting for more than half of its top line.
For investors, however, an important question remains about each of these companies.
Are they poised to repeat the feat?
You've heard the warning/disclaimer/adage before: "Past performance is no guarantee of future results." You should take that statement seriously.
On the other hand, plenty of stocks have experienced tenfold growth two or more times in their existence. It's just a matter of how much time it takes for one to do so, and whether or not a business or its products are capable of repeating history in that way.
And as always, assessing this must be done on a case-by-case basis.
Take Nvidia as an example. While the stock's heroic rally since 2019 was largely driven by the growing demand for AI systems, that market is still in its infancy. A study published by Precedence Research forecasts the global AI hardware market will grow from just under $54 billion this year to nearly $250 billion by 2030. It's likely Nvidia's current dominance of its segment of that arena positions it to capture a healthy share of this growth. The company is also working on autonomous vehicle technology that has yet to become mainstream, but that could. Precedence Research also expects that the self-driving car market will be more than 10 times bigger than it is now by 2032.
In other words, yes, Nvidia shares could turn $1,000 into $10,000 again in the foreseeable future.
Procter & Gamble could as well, though it would get there at a much slower pace. The world will never not need clean clothes, razors, diapers, tissue, or toothpaste. It just won't need these goods in markedly greater quantities than it did in the prior year. Don't be surprised to see P&G's sales growth stay just barely ahead of inflation, while its stock remains just barely ahead of the S&P 500.
NYSE: PG
Key Data Points
Still, P&G's a solid dividend payer. Not only has the company paid dividends like clockwork for decades, it has raised its dividend payments annually for the past 67 consecutive years. That's quite a track record.
The only company in this trio that I doubt can dish out another ten-bagger gain anytime soon -- or even not so soon -- is Celsius Holdings.
That's not a criticism of the company or its products. Both are fine. But the energy drink market is already dominated by powerhouses like Red Bull and Monster Beverage. There's room for more competitors in the business, but dethroning an established market leader is never easy -- even when you're getting help from a giant like PepsiCo.
The bigger factor that could hold back Celsius stock from further growth, however, is its valuation.
A bunch of investors have clearly latched onto the company's story without looking carefully at the math. Shares now trade at 11 times the company's trailing-12-month revenue, and 53 times next year's expected earnings of $2.87 per share. For perspective, the marketwide comparisons are closer to 3 times sales and 20 times earnings. So its shares are already priced as if Celsius Holdings' business will be 3 to 4 times bigger than it is right now. Not only does this leave little room for additional price appreciation, such a forward-looking valuation discounts the possibility that its growth pace could slow down. Players like Red Bull and Monster aren't simply going to leave this up-and-comer to expand unchecked forever.
This sort of big-picture, forward-looking analysis is, of course, something you should be doing for any stock you're considering, regardless of its history of delivering gains to shareholders.
