Many skyrocketing growth stocks turn out to be short-lived shooting stars. But what if I told you that some stocks can offer all the benefits of growth investing, while limiting the investment risks? I’m talking about innovators targeting very large end markets, armed with robust cash earnings and solid balance sheets.
In that regard, there are three huge growth stocks that should hold up for a decade or more. They should serve your portfolio well for a long time and help you build long-lasting wealth.
Let’s start with Fiverr International (NYSE: FVRR).
Often dismissed as a beneficiary of the coronavirus lockdown with questionable business prospects in a normal economy, Fiverr continues to prove the doubters wrong. The freelance services marketplace operator has more than tripled its revenue in five years, including a 14% increase in the past two years.
The company’s mission is to “change the way the world works together.” That ambitious goal means renewing the way people think about the concepts of work and career. Management sees an addressable market for creative, professional and technical freelance services worth $247 billion in the US alone. The total addressable market is growing as companies embrace contractors and freelancers. And it’s a big world beyond US borders, giving Fiverr an even bigger long-term goal. The majority of freelancing is still managed offline, further expanding Fiverr’s business career.
So Fiverr has big dreams, suggesting a growth story for the ages. It’s also quite profitable, converting 22% of Q2 sales into free cash flow.
I told you earlier about Fiverr’s skeptical market makers. The share price has fallen 88% in three years and shares are available at the lowest valuation of nine times forward earnings estimates. This is one of my favorite stocks to buy today, and I expect it to soar over the next decade.
Next, let me introduce you to The Trade Bureau (NASDAQ: TTD).
This company helps advertisers publish effective digital advertising campaigns. If Fiverr matches the right freelancer with the right job, The Trade Desk matches the right advertising space with the right marketing message.
It is also an innovator, coming up with new technologies to overcome the limitations of ad tracking. The Unified ID 2.0 platform is a privacy-focused replacement for the tracking cookies that have powered this industry for decades. Other companies are free to use this open standard, but The Trade Desk largely designed it.
So shares of The Trade Desk soared during the recent downturn in the online advertising industry. That makes sense because the company makes advertising campaigns more cost-effective. It’s even more important to get the most value out of your advertising budget when consumers are clutching their wallets, as they often do during inflation crises.
Top sales are up 57% in two years and should continue to rise in the coming years. The balance sheet is also squeaky clean, with $1.5 billion in cash equivalents and no long-term debt. Trade Desk shares aren’t cheap, but investors are paying a premium price for good reasons.
Finally say hello to Toast (NYSE: TOST).
This company supplies software and hardware for the restaurant industry. Food service managers have many back-end options, ranging from specialized payment services and marketing tools to shift tracking spreadsheets and handwritten notes. Toast can do it all in a fully integrated system. With every transaction, ingredient inventory, marketing strategy, menu planning and more are updated. And you don’t have to figure out how to get a bunch of incompatible systems to talk to each other.
Toast’s expansion plan is very methodical, targeting a few cities at a time until a legion of satisfied customers can drive effective word-of-mouth marketing. The order-taking tablets and payment terminals are sold at cost, giving small businesses another reason to try Toast’s system at minimal cost.
And the system really works. Toast’s turnover has done just that doubled in two years. The company is profitable with $1.2 billion in cash reserves and not a single cent in long-term debt. If you build a great product, the customers will come.
This is another high-octane growth story with a huge target market. Toast-based services are already ubiquitous in my neck of the Florida swamps, but there’s a lot of room for further expansion elsewhere. And as I said in the Fiverr analysis, it’s a big world and Toast’s strategy should go international at some point. The stock currently has a premium price tag, but I don’t mind because Toast’s business prospects are both clear and enormous.
Have you ever felt like you missed the boat on buying the most successful stocks? Then you would like to hear this.
On rare occasions, our expert team of analysts provides a “Double Down” Stocks recommendation for companies they think are about to pop. If you’re worried that you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
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Amazon: If you had invested $1,000 when we doubled in 2010, you would have $21,154!*
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Netflix: If you had invested $1,000 when we doubled in 2004, you would have $406,992!*
We’re currently issuing ‘Double Down’ warnings for three incredible companies, and another opportunity like this may not happen anytime soon.
See 3 “Double Down” Stocks »
*Stock Advisor returns October 21, 2024
Anders Bylund holds positions at Fiverr International, The Trade Desk and Toast. The Motley Fool holds and recommends positions in Fiverr International, The Trade Desk, and Toast. The Motley Fool has a disclosure policy.
3 Breakout Growth Stocks to Buy and Hold for the Next Decade was originally published by The Motley Fool
