It’s not always easy to see the differences between a value stock and a growth stock. Often a single stock will exhibit the characteristics of both: a beaten-down stock whose business can still whip the market indexes.
With the economy bounding back strongly into bull mode, it’s not uncommon to see previously battered businesses now posting gains in the double- and triple-digit percentages. But a lot of that is just getting them back to even. We want stocks that can go the distance, not just quickly flame out.
That’s why Wall Street thinks the following three stocks have stamina. They’re expected to steadily grow their earnings at over 30% annually for the next five years, meaning profits will double in less than five years time. As earnings tend to drive stock prices, these three companies have the potential to be even bigger winners within the next five years.
Amazon (NASDAQ:AMZN)…enough said. Next!
But seriously, the e-commerce giant has been a juggernaut for the past five years (make that more than 10 years), and there’s no reason not to expect it to continue being one in the future.
Earlier this year, Bloomberg reported Amazon was on track to surpass Walmart as the largest retailer, as consumers will purchase $632 billion worth of goods from the online retailer versus $532 billion at Walmart. While most of those sales will be from third-party retailers, not its own goods (as will be the case with Walmart), it still shows just what a potent force Amazon is today.
Equally important, if not more so, is its Amazon Web Services cloud computing business, which has long been the backbone of its profitability. It’s telling that Amazon was able to get the Defense Department to cancel a $10 billion sole-source contract with Microsoft — a decision that will undoubtedly see it gain at least an equal share as its rival when the contract is doled out again.
Of course, it must be mentioned that Congress is talking about breaking up Amazon and other big tech companies because they have near-monopoly power. While it’s possible that could happen, just as likely are mere restrictions on it. Or, nothing at all comes from the saber-rattling.
In the meantime, analysts forecast Amazon will grow earnings at almost 38% annually for the next five years, meaning it will double profits in about four and a half years. With a market cap in excess of $1.8 trillion, it stands to reason the e-commerce giant could be a $4 trillion company over the next half-decade. Heck, some even think the retailer’s stock could hit $10,000 by 2025!
2. Chipotle Mexican Grill
Chipotle Mexican Grill (NYSE:CMG) was able to survive the pandemic intact because, unlike much of the rest of the restaurant industry, its business was already takeout-friendly. The fast-casual, assembly line production model it had developed over the years enabled the restaurant to quickly transition to a takeout and delivery model using its robust mobile ordering platform.
Adding in more drive-thru Chipotlanes was already an imperative before COVID-19; now it’s going to be even more so. But the payoff should be bigger. CEO Brian Niccol believes its restaurants can readily achieve $3.5 million in annual unit volumes (how much business each restaurant can realize each year), which would be a 40% increase.
Wall Street forecasts that Chipotle can see earnings sustain over 55% growth each and every year for the next five years, which would translate into profits doubling every 15 months. It’s probably why at least one analysts says the Mexican food chain is the best stock to buy this year and forecasts it will hit $2,000 per share.
That could easily just be the beginning, though, if it turns out to be the profit-generating machine that analysts predict. Chipotle Mexican Grill’s current $44 billion market cap could look quaint in a few years.
Cybersecurity specialist CrowdStrike Holdings (NASDAQ:CRWD) has doubled revenue every year since its 2019 IPO as high-profile system hacks of companies like Colonial Pipeline remind businesses of the need for tighter controls. Just last week, Morgan Stanley revealed the personal data of its corporate clients was breached allowing the hackers to gain access to sensitive information such as Social Security numbers.
CrowdStrike uses sophisticated machine learning, artificial intelligence, and behavioral analysis to detect and thwart cybersecurity risks, but also give customers enterprise-level personalization and customization to dial in just the sort of protection they seek.
Analysts believe CrowdStrike’s industry-leading threat protection technology will generate long-term annual earnings growth of 67%, suggesting profits — like the company’s sales growth history — will double just about every year.
The cybersecurity stock is up 138% over the last 12 months, and 19% year to date, but since the threat level of hacking so high, I think CrowdStrike’s stock could double again sooner rather than later.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.