Historically, growth stocks have delivered astounding compounding returns. Stocks like Microsoft (NASDAQ:MSFT), Home Depot (NYSE:HD) and Monster Beverage (NASDAQ:MNST) demonstrate the massive wealth creation generated through sustainable growth over decades. In today’s market, secular growth stocks exist in various industries.
Typically, multibaggers, known for their ability to return their original investment several times, often come from innovative companies. These stocks experience significant growth due to cutting-edge technology or disruptive business models. Additionally, having a strong market position in an emerging industry can be a catalyst for multi-year growth.
This edition focuses on three growth stocks with multibagger potential. As recent quarterly results have indicated, these companies are growing rapidly. Notably, they are currently outperforming the competition through rapid innovation. What’s more, considering the size of their markets, each can achieve sustained growth.
Instead of looking for short-term gains, opt for long-term compounding in these potential multibaggers. This article delves into the growth drivers of the three, uncovering the reasons behind their massive upside potential.
DoorDash (DASH)
DoorDash (NASDAQ:DASH) is a food delivery leader, competing with major rival Uber Technologies (NYSE:UBER). It is the largest online food delivery service in the United States, commanding a 66% market share. This dominance is a testament to its user-friendly platform and rapid expansion strategy.
On February 15, DoorDash reported yet another impressive quarterly report. In the quarter, marketplace gross order volume rose 22% year-over-year to $17.6 billion. Additionally, total orders were another highlight, surging to $574 million, a 23% YOY increase.
The growth in orders led to an impressive revenue increase from $1.8 billion to $2.3 billion, a 27% YOY growth. These results highlighted the ongoing momentum as the delivery giant capitalizes on the growing online food delivery market. Notably, monthly active users surged to an all-time high, hitting 37 million.
What sets DoorDash apart is its continuous investment in technology and tools that benefit merchants and customers. For instance, its customer membership program DashPass saw a record 18 million members at the end of 2023. The program is driving higher order frequency, generating more revenue for DoorDash.
Finally, expansion into new geographies and markets like grocery and convenience items delivery is another growth driver. These adjacencies have expanded the customer base, enhanced user engagement and increased order frequency. As DoorDash continues to scale, margins will improve, making it one of the most compelling growth stocks.
CAVA (CAVA)
CAVA (NYSE:CAVA), a rapidly growing fast-casual restaurant chain, has garnered interest among Gen Z with its unique Mediterranean-inspired menu. The company listed last year with promises of an aggressive expansion strategy. If management executes the growth plan, it will be one of the best growth stocks to own over the next decade.
3Q 2023 results revealed that CAVA restaurants are experiencing soaring consumer interest. Traffic rose 7.6% in the quarter, driving a 14.1% same-restaurant sales growth. The robust increase in same-store sales highlights CAVA’s growing popularity.
Over the next few years, CAVA will see significant revenue growth as it opens new restaurants. The company has 290 restaurants operating in 24 states. Management believes there is room for 1,000 CAVA restaurants in the U.S. by 2032.
Another exciting aspect of CAVA is its focus on digital sales channels, including mobile ordering and delivery partnerships. In Q3, the digital channel represented 35.5% of the company’s revenue mix. This digital-first approach caters to evolving consumer preferences and drives higher-order values.
CAVA is building a strong brand identity and taking share from other fast-casual restaurants. Focusing on healthy, customizable meals fits the growing trend toward health-conscious dining options. According to Morgan Stanley analysts, it could be the next Chipotle Mexican Grill (NYSE:CMG) as it scales and increases units.
Toast (TOST)
Toast (NYSE:TOST), a comprehensive restaurant management platform, has been serving up impressive growth figures. After a stellar earnings report on February 15, it is hard to ignore the stock. With annual recurring revenue of $1.2 billion at the end of December 2023 growing 35%, this is a top pick.
The company’s platform addresses the critical needs of the restaurant industry, making it an indispensable partner. Today, restaurants are using Toast to manage all their operations. It features a point-of-sales system supported by a software-as-a-service product offering features like online ordering, reservations, scheduling, retail capabilities and websites, to name a few.
In the latest quarter, the company reported a 35% YOY revenue growth, driven by the adoption of its platform by restaurants of all sizes. As of the end of 2023, it had over 106,000 restaurants on the platform. It added 6,500 net locations in Q4, highlighting the incredible momentum.
With the restaurant industry digitizing rapidly, Toast’s potential market size is expanding, offering a long runway for growth. Its strongest market, the SMB segment, continues to grow with brands like Wetzel’s Pretzels, The 99, Dirty Dough, Romano’s Macaroni Grill, joining Toast in 2023.
Finally, management expects growth from new growth vectors like enterprise, hotel restaurants and international markets. For instance, Choice Hotels International (NYSE:CHH) recently selected Toast as a brand standard for Cambria and Radisson Hotels. Toast’s focus on innovation will solidify its position as a leader in the restaurant tech space.
On the date of publication, Charles Munyi did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
