Historically, the best investments have come in buying high growth stocks at a reasonable valuation and holding them for a decade or more. We all know the past performance of stocks as Amazon, Netflix, and Apple, which have yield multiples of over 100x for investors over the past 20 years. But what about stocks that have a chance to go up future life changing returns?
Three growth stocks that could be huge winners over the next decade are Autodesk (NASDAQ: ADSK), Coupang (NYSE: CPNG), and Latch (NASDAQ: LTCH). Here’s why.
Autodesk is a decades-old software company that rose to prominence in the late 1980s with its companions Adobe and Microsoft. It started selling 2D design software called AutoCAD, but has expanded into many other products since then, whether through in-house releases or acquisitions. Currently, its most important product is Revit, a 3D design tool primarily used by architects to design buildings according to building information modeling (BIM) standards, which most governments adopt around the world. Autodesk has also made a smooth transition to subscription-based products, with over 95% of revenue coming from recurring sources, making the company much more reliable throughout the business cycle.
AutoCAD and Revit have been the main growth engines for Autodesk over the past two decades and are the main reasons the company’s shares have grown 300% over the past five years. The company also expects to generate $ 4.3 billion in revenue and over $ 1.5 billion in free cash flow for the fiscal year ending January 2022. However, over the next decade, the Majority of Autodesk’s growth will come from its new cloud-based products. For example, Fusion 360 is for manufacturing, mechanical and electrical design. Unlike legacy design systems, Fusion 360 is built for the cloud and has many extensions to other software, making it easier for different engineering teams and disciplines to work together on projects.
On its Investor Day, Autodesk said that Fusion 360 now has 165,000 paid subscriptions, with a compound annual growth rate (CAGR) of 53% over the past three years. And thanks to its expansions / upsell strategy, billings have grown much faster than subscriptions, at a CAGR of 107% over the past three years. Autodesk offers many other products with similar growth potential to Fusion 360, such as Forge (its third-party development platform), Autodesk Construction Cloud (construction software) and Autodesk Tandem (digital twins that allow a builder to have a virtual image of his plans).
With stable business from AutoCAD and Revit and many promising new products and services, Autodesk is set to grow into a much bigger company in a decade which will likely benefit shareholders.
Amazon has been a long-term stock market winner due to its dominance of e-commerce in the United States. Coupang is another company looking to do just that, but in South Korea. The company went public this spring through an initial public offering, raising $ 4.6 billion.
Coupang’s core business is its e-commerce platform, which offers a wide selection of items to South Korean consumers, most of which can be delivered in a day or less. The company is able to deliver at such a speed because it has its own delivery and warehouse network, with more than 15,000 full-time delivery drivers. This means that, unlike Amazon, Coupang is a vertically integrated e-commerce company, giving it a distinct advantage over anyone trying to compete with it in Korea.
In addition to the e-commerce platform and delivery network, Coupang has launched adjacent businesses such as Rocket Fresh (grocery delivery) and Coupang Eats (food delivery). All of these companies are growing rapidly, resulting in a 71% increase in revenue in the last quarter to $ 4.5 billion. Active customers reached 17 million and revenue per active customer increased 36% to $ 263 during the period. With the possibility of continuing to grow in South Korea and expansion plans in other countries like Singapore, Taiwan and Japan, Coupang should be able to increase its revenues, profits and cash flow to a high pace for many years. Ultimately, this opportunity to bolster financial performance would give the title the potential to be a winner over the next decade.
Unlike the two companies listed above, which have market caps in the tens of billions, Latch is much smaller, with a market cap of $ 1.7 billion. It’s an apartment and commercial building hardware and software company that makes money selling smart lock and access subscriptions to building owners. Latch customers install their smart door handles on the front door of every apartment and common area during construction, making it possible to connect each room to Latch’s software platform. From there, property owners and managers can easily provide guests with room access through Latch’s mobile app, which replaces the tenants’ key.
Latch doesn’t make much profit from its hardware sales, so the majority of its business comes from software subscriptions. Homeowners typically pay Latch around $ 7 to $ 12 per month per part, depending on how many products they want. This means that a great forward-looking indicator of Latch’s future growth is the number of units it has reserved with its customers. In the second quarter, the cumulative number of reserved units reached 451,000, up 108% from 2020.
As it can take more than five years to complete a building, Latch only made about $ 9 million in revenue last quarter, which seems minimal compared to its market capitalization of $ 1.7 billion and the last quarter. cumulative number of apartments reserved. But without any client (referring to building owners) ever opting out of its subscription service, Latch has a clear path to rapidly increasing revenue over the next decade, solely from its homes. existing reserved. If it continues to increase the number of reserved units under management, the revenue base could number in the hundreds of millions in five to ten years, which would be great news for shareholders.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.Source link