Doubling your money within five years is no easy task. It requires careful consideration of what stocks you choose to buy. Even investrors who concentrate their search on quality companies at reasonable valuations isn't going to get every stock pick right. One way to improve your chances at finding stocks that can double is to buy stocks that can grow their business at high-double-digit rates.
To aid your search, here are two stocks poised to double in five years.
1. Shopify
Shopify (SHOP 2.63%) has positioned itself as the operating system of e-commerce. It provides all the tools a merchant needs to open an online storefront and grow its business, including payment processing and shipping solutions. The stock has delivered phenomenal returns since its initial public offering in 2015, but the company continues to post high rates of revenue growth that point to many years of excellent returns.
NASDAQ: SHOP
Key Data Points
History says that winners tend to keep on winning, and Shopify continues to grow like crazy. Over 875 million customers made a purchase with a Shopify merchant last year. There are hundreds of millions of people using Shop Pay. Altogether, the company delivered outstanding revenue growth of 26% last year, with revenue growth accelerating to 31% in the fourth quarter.
Shopify started out years ago primarily helping small businesses compete in a crowded e-commerce market, but its expanding capabilities are now attracting high-volume brands generating billions in sales volume. It should continue to win more large businesses to its platform, considering the investments it is making in automation tools powered by artificial intelligence (AI).
The stock looks expensive trading at 80 times earnings. But it's worth it, considering that Shopify's trailing gross merchandise volume of $292 billion is less than 1% of global retail sales. Just as American Express is still growing after 174 years in business, Shopify could grow for decades.
Plus, the company's free-cash-flow margin expanded to 18% last year, up from 13% in 2022. Wall Street analysts anticipate further margin expansion to drive earnings-per-share growth of 35% on an annualized basis over the next few years. There's enough growth ahead to double the share price by 2030.
2. Peloton Interactive
Peloton Interactive (PTON 1.59%) has given investors a roller-coaster ride over the last five years. The brand experienced tremendous growth through the pandemic, as people invested in at-home exercise equipment, but the company has struggled to grow over the last few years.
However, the stock is up 92% over the last year and could climb higher as management reduces costs and makes the business profitable again.
NASDAQ: PTON
Key Data Points
After reaching a peak of $4.1 billion in 2021, Peloton's revenue has started to stabilize around $2.6 billion. It continues to serve over 6 million members across the Peloton app and equipment owners who subscribe to online classes.
Meanwhile, Peloton is seeing a significant rebound in profitability. It is on track to exceed $200 million in cost savings for the current fiscal year ending in June.
The stock is trading at 23 times free cash flow (FCF), which is a reasonable valuation based on management's guidance for $200 million in FCF for the full year. That brings the stock's forward P/FCF multiple to a more reasonable 18.
Over the next few years, further cost savings and lower interest expense from debt reduction could fuel the company's bottom line and benefit the stock.
Peloton has a leading brand in an exercise equipment market valued at $50 billion. There is room for the company to grow its revenue over the long term. At these discounted share prices, investors could double their money in the next five years as the company returns to profitable growth.
