Doubling your money in five years will usually mean you are doing well enough to outperform the rest of the stock market. This isn't easy, but if you focus your stock selection on the companies with above-average growth prospects, it can be done.
The important thing is to not assume every stock you buy will perform as you expect. Spreading your bets across a group of promising stocks can increase your chances of landing a coveted multibagger over the long term.
That said, here are three growth stocks that have a good chance of doubling your money in five years.
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1. Dutch Bros
Identifying relatively small restaurant brands with a long runway for growth can lead you to some of the most rewarding stocks. Dutch Bros (BROS +0.07%) was founded in 1992 in Oregon, so it's not an unproven concept. Its culture of friendly service and wide-ranging menu of drinks -- from coffee to smoothies -- is resonating with consumers and pointing to a huge growth opportunity.
Dutch Bros is building one of the strongest brands in the restaurant space, and it's doing it through giveaways, kindness, and putting people first. It has a deep bench of managers within the company ready to lead new shops, which should sustain consistent service as it expands across the U.S.
NYSE: BROS
Key Data Points
It's operating in only 19 states with around 1,000 shops. Management is targeting 7,000 over time, but the important thing is that Dutch Bros is expanding profitably. Its adjusted net income improved to $45 million in the second quarter, up from $31 million in the year-ago quarter. Its locations are small and designed for drive-thru service, which should support above-average returns on capital and earnings growth over the long term.
With the coffeehouse chain's significant room for expansion, investors should expect continued revenue growth in the mid-teens or higher over the next five years. Assuming the stock continues to trade around the same price-to-sales multiple of about 5, the stock could more than double in value by 2030.
2. MercadoLibre
MercadoLibre (MELI 1.49%) has delivered stellar returns over the last 15 years. A $1,000 investment over that time frame would be worth $35,000 today, and there is still enormous potential for this e-commerce and fintech operator in Latin America.
NASDAQ: MELI
Key Data Points
MercadoLibre is the leader in e-commerce and fintech services in a region of 650 million people. It has gained more than 76 million unique buyers on its marketplace, contributing to its $16.5 billion in gross merchandise volume in the third quarter.
The company is steadily expanding its fintech services across the region, including mobile payments and consumer credit. Its payments service has 72 million users, an increase of 29% year over year in the third quarter. This is all coming together to form a valuable ecosystem -- about a quarter of transactions in Mexico on its marketplace were completed with one of its payment tools.
MercadoLibre continues to expand its fulfillment services for faster shipping, and its credit portfolio increased 83% year over year last quarter, giving the stock a lot of upside. Total revenue is growing by the high double digits, making the stock's price-to-sales multiple of 4.8 quite conservative. This combination of growth and value could double the share price within the next five years.
3. Spotify Technology
Spotify Technology (SPOT 0.26%) is the leading audio streaming platform with nearly 700 million monthly active users. It should eventually reach 1 billion since it offers free ad-supported content in addition to premium subscription plans. But the most important reason that it can produce market-beating returns for investors is how Spotify is leveraging AI to drive growth in revenue and profits.
The company has released new features over the past few years, including generative AI powered playlists and its AI DJ. These features have users spending more time listening, and that's creating more opportunities to increase revenue through premium subscription plans at relatively low incremental cost.
NYSE: SPOT
Key Data Points
Operating income soared 53% year over year last quarter, partly from strong growth in premium revenue, which is rising faster than costs. As more users spend time with the service, it generates more data that Spotify can use to improve these features, and thereby increase user satisfaction.
Spotify is becoming unstoppable with AI and data. This opportunity has a long way to play out. The stock trades at a forward (1-year) price-to-earnings multiple of 48, but this is supported by earnings estimates projecting 33% annualized growth over the next several years. This could easily double the stock by 2030.
