Many investors are attracted by the prospect of strong returns from income doubling stocks. Doubling one’s capital within a reasonable timeframe is undoubtedly an attractive proposition.
Certain artificial intelligence (AI)-driven stocks demonstrating triple-digit growth in recent times highlight the potential for significant gains over short periods. However, uncovering the next company poised for such growth can involve a degree of fortune.
EPS underpins a given company’s potential for stock price appreciation. One must consider stocks that have demonstrated EPS growth at a similar rate. Also, timing is a crucial factor, with broader markets averaging approximately 10% annual returns. This implies that simply investing passively could double an investment after seven years. We ought to examine companies with prospects to realize this within a more condensed timeframe, for example, doubling in three years.
Let’s delve into three stocks with sound fundamentals that position them well for further gains, thanks to continued growth.
Nu Holdings (NU)
Latin American fintech and digital bank Nu Holdings (NASDAQ:NU) shows promise for growth. Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) recently acquired a stake in the company, whose stock price increased over 80% in the last twelve months. NU boosted its net income by 169% in this period through aggressive expansion in core markets.
Latin America remains largely cash-based with over 650 million people, representing a substantial addressable market opportunity. NU has attracted 99.3 million customers, adding 5.5 million last quarter. With room for further growth in multiple markets, NU started in Brazil and has since entered Mexico and Colombia. Encouragingly, average revenue per user (ARPU) rose 30% in the last year as NU gains more customers and increases revenues.
In its third consecutive year of growth, NU posted an annual EPS of 21 cents last year, becoming profitable since its 2021 IPO. Analysts expect NU’s EPS to double to 42 cents this year, with further expansion projected to 2025. This forecasted doubling of EPS qualifies Nu Holdings as an income doubling stock with significant potential.
PayPal (PYPL)
PayPal (NASDAQ:PYPL) has been operating for many years and has become the established standard for e-commerce payments. However, this doesn’t mean that PayPal has ceased innovation or growth. Online shopping and digital money adoption continue to increase worldwide. The global online payment company facilitates digital transactions in virtually every country.
Following disruptions caused by the pandemic, PayPal saw its EPS almost double from 2022 to 2023, rising from $2.09 to $3.84. The annual estimated normalized EPS for the next three years for PYPL sees earnings at $5.07 in 2026, with 2024 at $4.14 per share.
Also, PayPal’s share price performance has fluctuated significantly in recent years, detaching from fundamentals at times. Yet, the stock is currently trading at a relatively low valuation compared to its peers. It has a price-to-earnings (P/E) ratio of 14.9x, which is around half the average ratio for the S&P 500 index at 29x. This opens the potential for further capital appreciation if PayPal can maintain its strong growth trajectory.
Duolingo (DUOL)
Popular education app Duolingo (NASDAQ:DUOL) has made it easier for users to learn languages globally. It has seen continued subscription growth in recent years. Daily active users of the gamified language learning platform increased by 54% to reach 31.4 million in the last year alone. This indicates significant room for further expansion as the company estimates its total addressable market (TAM) to be near two billion people.
Financially, Duolingo has achieved profitability on the back of its strong revenue growth, even after the pandemic boosted internet usage worldwide. The profit margin increased by 7.82% and the operating margin by 9.81% after the company’s quarterly revenue growth saw a 44.90% growth YOY.
Analysts forecast the company’s EPS will continue rising rapidly in the coming years, potentially doubling year-over-year (YOY). For the current year, EPS is projected to reach $1.69, marking an over 480% jump from 2023. On average, analysts give Duolingo a price target of $250.34 per share, representing around 34% upside from current levels over the short to medium term.
On the date of publication, Stavros Tousios did not have (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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
