The kind of stock whose value can double overnight is often also the kind that can become almost worthless about as quickly. So, investors shouldn't chase out such gains in a short period. However, solid, well-established corporations can safely see their share prices double in six years, a feat that requires a compound annual growth rate (CAGR) of 12.2%.
To be clear, that's not an easy thing to do. Still, here are two companies that could pull it off: Exact Sciences (EXAS 0.10%) and Airbnb (ABNB 0.75%). Let's consider why these two innovative businesses could turn $1,000 into $2,000 by the end of 2030.
1. Exact Sciences
Exact Sciences develops cancer diagnostic tests, and it's been on fire this year. Shares are up 24% since the beginning of 2023 on the back of solid financial results and meaningful clinical progress. Let's begin with Exact Sciences' third-quarter earnings. The company's revenue of $628.3 million increased by 20% year over year.
Exact Sciences' most important segment is screening, which records sales related to its famous Cologuard test for colorectal cancer, its most significant source of sales. Screening revenue in the third quarter jumped by 31% year over year to $472 million.
Of note, Exact Sciences' top line has been affected by fluctuating sales of COVID-19 diagnostic tests, but the company is performing well regardless. On the bottom line, Exact Sciences managed to turn in a net income of $794,000. While that doesn't sound like a lot, it is much better than the net loss of $148.8 million reported in the year-ago period.
Now, onto Exact Sciences' clinical progress. The company is developing a next-gen version of Cologuard, and it recently reported excellent results from a clinical trial for it. First approved in 2014, Cologuard has helped give millions of patients a non-invasive, at-home test kit for one of the leading causes of cancer deaths in the U.S. -- that is nevertheless very treatable when caught early.
Exact Sciences' pioneering work in helping mitigate colorectal cancer-related deaths -- and the company's entire innovative cancer testing platform -- is what makes it a revolutionary biotech company. However, some physicians have been hesitant to recommend Cologuard to their patients, citing false positives as an issue. Cologuard 2.0 showed 30% fewer false positives in clinical trials, so that should help convince many doctors who are currently holding out.
Exact Sciences plans to launch the next-gen Cologuard in early 2025 if all goes according to plan. It estimates that there are about 60 million eligible patients in the U.S. that remain unscreened, so there is ample room for the company to grow its revenue, especially with a newer, better product. Further, Exact Sciences has developed other diagnostic tests that should contribute, including one that helps monitor for recurrence and in choosing the best treatment option for breast cancer patients.
Lastly, Cologuard 2.0 will cost at least 5% less to make, helping reduce Exact Sciences' costs and expenses and boosting its margins and bottom line. Exact Sciences may not accomplish its goal to eradicate cancer in the next six years, but it should make progress -- and the company's business looks strong enough to deliver the kinds of returns it needs to double one's initial capital in this period.
2. Airbnb
Airbnb helped revolutionize the way people travel. The company offers a platform where vacationers can find great alternatives to hotels: private residences being rented out by their owners. The advantage here is that private houses or rooms have more of a homey feel, not to mention the privacy and amenities people are used to having in their own homes. Airbnb also offers experiences people can do while they are away.
Airbnb's business sunk during the pandemic, but the company has recovered nicely. It has been recording solid financial results this year. In the third quarter, revenue of $3.4 billion jumped by 18% year over year. Airbnb's bottom line of $4.4 billion -- compared to $1.2 billion in the year-ago period -- was positively affected by a one-time tax benefit of $2.8 billion. Even without this item, adjusted net income was $1.6 billion, while the company's free cash flow of $1.3 billion was about 36% higher than the year-ago period.
Some investors may worry about the impact of legislation in places such as New York City, where there are now strict rules regarding how owners can rent out their homes. However, as management argues, Airbnb operates in some 100,000 cities worldwide, and although New York is unquestionably one of the largest, the business does not stand or fall with it. Airbnb should continue to perform well as long as people love to travel.
One reason is that it benefits from a network effect, with renters and hosts increasingly seeking one another on the platform, making it more valuable. That should allow Airbnb to maintain its streak of solid top-line growth and deep profitability through 2030 and beyond. The stock is well-positioned to deliver a CAGR of 12.4% in this period.
