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 thrills of growth investing with limited investing risks along the way? I'm talking about innovators targeting very large end markets, armed with robust cash profits and solid balance sheets.
On that note, here are three tremendous growth stocks that should have staying power for a decade or more. They should serve your portfolio well for a long time, helping you build long-lasting wealth.
Fiverr's ambitious mission
Let's start with Fiverr International(NYSE: FVRR).
Often dismissed as a coronavirus lockdown beneficiary with questionable business prospects in a normal economy, Fiverr keeps proving the doubters wrong. The operator of a marketplace for freelance services has more than tripled its sales in five years, including a 14% increase in the last two years.
The company's mission is to "change how the world works together." That ambitious goal involves revamping how people think about the concepts of work and careers. Management sees an addressable market of creative, professional, and technical freelance services worth $247 billion in the U.S. alone. The total addressable market is growing as businesses are embracing contractors and freelancers. And it's a big world beyond American borders, giving Fiverr an even larger long-term target. Most freelancing is still managed offline, stretching Fiverr's business runway even further.
So Fiverr has big dreams, suggesting a growth story for the ages. It is also quite profitable, converting 22% of its second-quarter revenue into free cash flow.
I told you about Fiverr's skeptical market makers earlier. The stock price has plunged 88% lower in three years and shares are available at the rock-bottom valuation of 9 times forward earnings estimates. This is one of my favorite stocks to buy today, and I expect it to soar in the next decade.
The Trade Desk's innovative advertising ideas
Next, let me introduce you to The Trade Desk(NASDAQ: TTD).
This company helps advertisers publish effective digital ad campaigns. If Fiverr connects the right freelancer to the right gig, The Trade Desk connects the right advertising space to the right marketing message.
It is also an innovator, devising new technologies to get around ad-tracking limitations. Its 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 The Trade Desk's stock soared during the recent downturn in the online advertising industry. That makes sense because the company makes ad campaigns more cost-effective. Squeezing maximum value out of your ad budget is even more important when consumers are holding on to their wallets, as they tend to do during inflation crises.
Top-line sales are up by 57% in two years and should continue to rise for years to come. Its balance sheet is also squeaky clean, with $1.5 billion in cash equivalents and no long-term debt. The Trade Desk's stock isn't cheap, but investors pay a premium price for good reasons.
Toast's one-stop-shop for restaurant solutions
Finally, say hello to Toast(NYSE: TOST).
This company offers software and hardware for the restaurant industry. Food service managers have lots of 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. Every transaction updates the ingredient inventory, the marketing strategy, menu planning, and more. And you don't have to figure out how to make a bunch of incompatible systems talk to each other.
Toast's expansion plan is very methodical, targeting a couple of cities at a time until a legion of happy customers can provide effective word-of-mouth marketing. The order-taking tablets and payment processing terminals are sold at cost, giving small businesses another reason to try Toast's system at a minimal cost.
And the system really works. Toast's sales have doubled in two years. The company is profitable with $1.2 billion of cash reserves and not a single penny of 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-powered services are already everywhere in my neck of the Floridian swamps, but there's lots of room for continued expansion elsewhere. And like I said in the Fiverr analysis, it's a big world and Toast's strategy should go international at some point. The stock carries a premium price tag at the moment, but I don't mind because Toast's business prospects are both clear and enormous.
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Anders Bylund has positions in Fiverr International, The Trade Desk, and Toast. The Motley Fool has positions in and recommends Fiverr International, The Trade Desk, and Toast. The Motley Fool has a disclosure policy.
