To double your money by 2030, you should look for companies consistently showing double-digit revenue growth. Assuming you’re buying those stocks at reasonable valuations, the share price will typically follow the growth of the business. This is why growth stock investing can be the single best way to build wealth over the long term.
One area that is turning up reasonably priced growth stocks right now is the $6 trillion global e-commerce market. Here are two fast-growing leaders that could double your investment in the next five years.
1. Shopify
Shopify (NYSE: SHOP) stock has been an incredibly rewarding investment for those lucky enough to get in early after the company’s initial public offering (IPO) in 2015. The shares have delivered a return of 2,800%, but the company still has a lot of room to keep growing and deliver great returns for years to come.
Shopify provides businesses with the tools to open and manage an online storefront. It generates revenue through subscriptions to its platform, but most of its revenue is driven by selling additional services to merchants, including payment processing, loans, and shipping.
The massive e-commerce market is a huge opportunity, as the company’s growth indicates. Second-quarter revenue grew 25% year over year after excluding the impact of the sale of its logistics business, and management guided revenue to increase in the low to mid-20s range in the third quarter. Keep in mind, Shopify has been around for more than a decade — and it’s still growing at these high rates.
The company has started to focus more on helping merchants expand internationally, which could keep its momentum going for several more years. Cross-border sales make up just 14% of its gross merchandise volume (GMV), but international GMV is growing faster than North America, up 27% year over year in Q2. This trend shows how products like Shopify Markets strengthen the company’s competitive edge in being a one-stop shop for merchants.
The stock’s price-to-sales (P/S) ratio of 12.5 is at the lower end of its previous 10-year trading range. With Wall Street analysts estimating the company to grow its revenue at an annualized rate of 21% over the next few years, it should maintain a growth rate of at least 15% through the end of the decade. That is enough to double the value of the stock, assuming it continues to trade around its historical average P/S multiple.
2. Coupang
Coupang (NYSE: CPNG) is the leading e-commerce store in Korea. It has more than doubled its revenue since 2020. It tumbled immediately after its IPO a few years ago, and the stock is now reasonably priced relative to its growth potential. Coupang should deliver market-beating returns.
Second-quarter adjusted revenue grew 23% year over year excluding the impact of its acquisition of luxury goods store Farfetch. The shares are down 54% since their IPO in 2021, but have climbed 16% over the last year as the business has shown the potential to improve margins and profitability.
Coupang generated $1.5 billion in free cash flow on $27 billion of revenue over the last year — a respectable margin for an online retail company. The company is using non-retail services like food delivery through its WOW membership program to build customer loyalty and boost margins. That will sound very familiar to Amazon Prime customers, which speaks to Coupang’s opportunity.
Investors could undervalue the growth potential in services and the impact on Coupang’s profitability. Gross margin improved two percentage points last quarter excluding the impact of Farfetch, driven by supply chain efficiencies and growing its margin-accretive service offerings. The company is also leveraging investments in automation with artificial intelligence to drive greater productivity.
Meanwhile, the stock trades at a modest P/S ratio of 1.48, which is below Amazon’s P/S multiple in its early years of growth. Analysts expect Coupang to grow the top line at over 16% annually over the next few years.
With Coupang in the early innings of expanding in Taiwan, revenue should continue to grow at double-digit rates through the end of the decade. The stock just needs to continue trading at the current discounted P/S multiple for shareholders to double their money by 2030.
Should you invest $1,000 in Shopify right now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Coupang, and Shopify. The Motley Fool has a disclosure policy.
2 Growth Stocks That Could Double By 2030 was originally published by The Motley Fool
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