You may have heard of instances where investors grew their investments into a tidy sum over the years. To do so, you need to park your money in solid businesses that have a long growth runway or that can latch on to sustainable tailwinds. Over time, $10,000 invested in these companies could multiply into a large sum that you can use for retirement. All you need to do is be patient and select the right companies to invest in.
What types of stocks could compound your wealth over the next decade? You should choose companies with strong market-leading positions, a reputable brand name, a stellar track record of growing their revenue, and a management team that can take the business to the next level. Here are three stocks that fit the bill. And the bonus is that this trio also generates healthy positive free cash flow that should give investors even more confidence in their ability to deliver steady, growing returns.
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Coupang
Coupang (CPNG -0.52%) is one of the largest e-commerce players in South Korea with services that include delivery of merchandise and groceries along with prepared foods and video streaming. Coupang has been growing rapidly over the past few years with total revenue rising from $12 billion in 2020 to $20.6 billion in 2022. Net loss has also narrowed significantly from $555.9 million to $92 million over the same period. The number of active customers climbed from 14.9 million in 2020 to 18.1 million in 2022 while revenue per active customer increased from $256 to $294.
The momentum has continued for the e-commerce player in the first nine months of 2023. Total revenue increased by 16.8% year over year to $17.8 billion with the company registering an operating and net income of $341.9 million and $327.3 million, respectively. Investors will also be pleased to know that Coupang generated a positive free cash flow of $1.4 billion for the nine-month period, a sharp reversal from the free-cash outflow of $718.7 million in the prior year. What's more, active customers have risen further to 20.4 million, up 14% year over year, while revenue per active customer came in 7% higher year over year at $303. These numbers are encouraging and point to Coupang's growing presence as it increases both its customer count and average spend. Just this month, the company opened its second fulfillment center in Taiwan and is slated to open a third in the first half of 2024. This opening marks its successful entry into Taiwan in 2022 and Coupang's app ranked No. 1 in Taiwan's shopping app downloads in the second quarter of 2023. With the e-commerce company's market-leading position and clout, investors can look forward to consistent growth in the coming years.
Shopify
Shopify (SHOP 1.11%) offers an e-commerce platform for aspiring entrepreneurs with the tools and functions needed to run their businesses. Shopify has demonstrated healthy top-line growth with revenue climbing by 21.4% year over year to $5.6 billion for 2022. However, a sharp rise in marketing and research and development expenses in that year caused the business to report an operating and net loss. Shopify picked itself up again in the first nine months of 2023 with a 27.2% year-over-year jump in revenue to $4.9 billion. Net income after adjusting for the impairment loss for the sale of Shopify's logistics business came in at $815 million, a healthy turnaround from the $2.8 billion loss in the year before. Moreover, both operating and free cash flow for the period were positive at $496 million and $459 million, respectively. Management also raised its revenue growth outlook for the remainder of 2023.
Shopify is continuously improving its product and service offerings to its clients and recently launched a new retail pricing plan called the Retail Plan for brick-and-mortar businesses selling in person. Meanwhile, the company also expanded the availability of its mobile point-of-sale system to the U.K. and Ireland while releasing new enterprise-grade payment hardware for the U.S. and Canadian markets. Shopify Audiences, which is available to Shopify Plus customers who use the company's payment infrastructure, can now connect to major advertising platforms such as TikTok, Snap, and Criteo. This functionality can halve customer acquisition costs and allow businesses to advertise better to find new customers. Shopify also partnered with Amazon to launch a "Buy with Prime" app to allow shoppers to shop on Shopify and check out with their Amazon account. These upgrades and collaborations should position Shopify well for further growth in 2024 and beyond.
Salesforce
Salesforce (CRM 0.42%) provides a platform for clients to access customer relationship management (CRM) tools. Like Shopify and Coupang, the CRM specialist has reported strong growth over the last several years. For its fiscal 2021 ending Jan. 31, Salesforce's total revenue came in at $21.3 billion. Two years later, revenue increased to $31.4 billion. Operating income more than doubled from $455 million to $1 billion over the same period, with net income fluctuating because of different taxation rates. The company's free cash flow also rose steadily from $4.1 billion in fiscal 2021 to $6.3 billion in fiscal 2023.
The strong momentum has carried on in the first six months of fiscal 2024. Total revenue rose 11.4% year over year to $16.9 billion with operating income leaping more than eightfold year over year to $1.9 billion. Net income came in at $1.5 billion, significantly higher than the $96 million chalked up a year ago. Salesforce's free cash flow for the period also jumped by 34.4% year over year to $4.9 billion, demonstrating the company's ability to consistently churn out healthy wads of cash. Recently, Salesforce launched the next generation of Einstein, which incorporates conversational artificial intelligence into every CRM application. The inclusion of this tool will help clients generate more accurate recommendations and drive productivity gains, thereby increasing adoption and acting as an attractive sales draw for the company. During Salesforce's Investor Day last year, management identified a large and expanding total addressable market worth around $290 billion in 2026 that is growing at an annual rate of 13%. This market size means there are ample opportunities for Salesforce to continue to grow both its top and bottom lines in the years to come.
