Finding emerging consumer brands while they're small is a simple, effective way to build lasting wealth in the stock market. Let's look at fast-growing companies that are on the verge of turning healthy profits and could deliver massive gains for shareholders over the next decade and beyond.
1. DraftKings
One way to find long-term winners is to identify companies that are benefiting from technological advancements. The online sports betting market is expected to reach $65 billion over the next five years, and DraftKings' (DKNG +1.21%) first-mover advantage in launching on mobile devices years ago has made it the runaway leader in this market.
NASDAQ: DKNG
Key Data Points
DraftKings commands over 30% share of the market in North America, and it continues to win more customers. It reported revenue of $1.2 billion in the fourth quarter, rising 44% over the year-ago period.
What's also notable about DraftKings' performance is the growth in spending per customer. Average revenue per monthly unique payer was $116 in Q4, up 6% year over year, and almost double the same quarter three years ago.
It's clear DraftKings can continue to grow revenue from existing customers in states that have already legalized online sports betting. The addressable market in states where the company is already operating is expected to grow from $20 billion to $30 billion by 2028.
More states are expected to legalize sports betting, which should justify the stock's expensive valuation. However, if DraftKings successfully expands into new markets like the lottery, where it recently announced the acquisition of leading lottery operator Jackpocket, it could turn the stock into a monster winner for investors over the next decade.
2. Cava Group
Cava Group (CAVA +2.05%) is filling out a huge opportunity in the Mediterranean fast-casual dining market. It ended 2023 with 309 restaurants generating $177 million in quarterly revenue. Its rate of growth and a strategy emphasizing consistency and profitability should make the stock a great investment.
NYSE: CAVA
Key Data Points
Cava capped off 2023 by reporting same-restaurant sales growth of nearly 18% in the fourth quarter, driven by strong traffic trends. There is clearly a high demand for this type of cuisine in the fast-casual market.
Importantly, Cava is following a profitable store-opening model. For the full year, it reported a net profit of $13.3 million, a significant improvement over the loss in fiscal 2022. Investors should expect strong earnings growth over the long term, given the company's healthy restaurant-level profit margin.
Lack of consistency and execution can destroy shareholder returns in restaurant stocks, but Cava has its eye on the ball. Management mentioned on its last earnings call that it is investing in artificial intelligence to make its restaurants easier to operate. It's also working on fine-tuning its loyalty programs to encourage more frequent traffic and improving training to deliver a consistent experience at every location.
Cava is clearly having success, but its current restaurant footprint is a fraction of more established chains. As it opens more restaurants, the business should deliver profitable growth that fuels big gains for patient shareholders.
