Some investors check their holdings daily, if not more often. It’s exciting to see what’s going on, especially when the news is good. However, the real gains come in the years and decades it takes to bring out sustainable growth and performance. It’s less dramatic, but much more valuable.
If you can close your eyes and imagine how much your investments could grow by 2030 or over the next six years, you would probably be happy with a 200% gain. If you’re ready to ignore the noise and get there, consider it MercadoLibre (NASDAQ: MELI) And About holding companies (NYSE:ONON)two stocks with powerful growth engines.
MercadoLibre: The Leading Ecommerce Company You’ve Never Used
Unless you have lived in Latin America, you will not have been able to use MercadoLibre’s services. But if you lived there, you would probably use the platform, the largest e-commerce and fintech platform in 18 countries in South America.
It is already the largest, but the growth rates are phenomenal and the opportunities are enormous. The core e-commerce business continues to deliver robust growth rates, with gross merchandise volume increasing 71% year-on-year (currency neutral) in the first quarter of 2024.
MercadoLibre has expanded into fintech services, and these are growing even faster and offering even greater opportunities. Total payment volume (TPV) is up 86% and the company is expanding its customer base, with monthly active users up 38% compared to last year.
Within all these companies, management has many opportunities to generate higher sales. For example, the new MercadoPago credit card had 1.5 million new signups and its TPV increased 173% year over year. While MercadoLibre’s core businesses continue to experience strong growth, the company has several new opportunities to explore that could boost growth in the coming years.
Could it really grow 300% over the next six years? MercadoLibre shares have traded at an average price-to-sales ratio of 5.2 over the past two years and have a market capitalization of $89 billion.
Keeping the price-to-sales ratio constant, which will triple over the next six years, implies a market capitalization of $267 billion and annual sales of $51 billion. That implies a compound annual growth rate (CAGR) of 21.6%. Revenue in 2023 increased by 83% (currency neutral) in 2023 and by 94% in the first quarter of 2024, so that seems very doable. Even with a lower price-to-sales ratio, this seems more than within reach.
Investors looking for top growth stocks should look to MercadoLibre stock.
On: The newest name in premium running shoes
On is a Swiss-based premium activewear company focused on footwear and known for its cloudTec running shoes. Developed by and for athletes, it resonates with customers everywhere looking for a well-crafted, more comfortable shoe.
Given its high-tech nature, On targets an affluent customer base and charges premium prices. The company believes it has a better product and charges accordingly, and customers agree. That leads to incredible growth, strong loyalty and higher full-price sales, which in turn leads to greater margins and robust profitability.
On is still in its infancy and is little known in many regions. That gives it a very long growth path. But it’s off to a great start. Although growth rates have slowed, they are still high despite inflation. The focus on a luxury clientele ensures resilience under macroeconomic pressure. Sales increased by 28% (currency neutral) in the first quarter of 2024, and net income more than doubled.
On an equity basis, it has a market capitalization of $12 billion and trailing-twelve-month sales of $2 billion. A tripling would turn this into a market cap of $36 billion and revenue of $6 billion. If we keep the average price-to-sales ratio of 7.7 constant over the next six years, this equates to a CAGR of 21%. Management expects annual revenue to grow 26% annually through 2026, so that seems entirely possible as well.
On has great market opportunity and runs a great company, making it a great growth stock to add to your portfolio.
Should you invest $1,000 in MercadoLibre now?
Consider the following before purchasing shares in MercadoLibre:
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Jennifer Saibil holds positions in MercadoLibre. The Motley Fool holds and recommends positions in MercadoLibre. The Motley Fool recommends On Holding. The Motley Fool has a disclosure policy.
2 Incredible Growth Stocks That Could Triple by 2030 was originally published by The Motley Fool
