When it comes to investing in the right companies for your portfolio, you need to ensure you select businesses that you understand and have the competitive advantages, financials, and leadership to drive lasting growth.
If you're looking for growth stocks that have what it takes to perform well for investors not just now but over the next five years and beyond, there are multiple contenders to consider. Here are two that look like excellent additions to a long-term investor's portfolio.
1. Vertex Pharmaceuticals
Vertex Pharmaceuticals (NASDAQ: VRTX) isn't a household name like some other businesses in the healthcare industry, but it should be a strong contender for the long-term investor looking for a profitable company on a strong growth trajectory. For years, Vertex has been the leader in the cystic fibrosis therapeutics market.
Vertex is the only company with drugs approved to treat the underlying cause of cystic fibrosis. Right now, most of its revenue comes from a single drug, Trikafta, which is approved to treat more than 90% of the U.S. cystic fibrosis patient population alone.
That drug won't face a patent cliff for well over a decade. Vertex is building out its pipeline of potential blockbusters that could transform the business in the coming years.
Vertex, along with its development partner CRISPR Therapeutics, became the first to ever get a CRISPR therapy approved at the end of 2023. That therapy is called Casgevy, and it is designed to be a one-time functional cure for sickle cell disease and transfusion-dependent beta thalassemia.
Specific cohorts of patients with these diseases are covered by current approvals, and Vertex's initial focus is primarily on patients in the U.S. and Europe, an addressable market that covers around 32,000 lives. However, consider that there are a combined total of millions of individuals worldwide with these blood diseases.
Vertex has plenty of other promising products in the works that it expects to launch in the next few years. These include its new triple-combination cystic fibrosis therapy, which the U.S. Food and Drug Administration just accepted its new drug application for, and suzetrigine, a non-opioid drug intended to treat moderate-to-severe acute pain ailments as well as neuropathic pain.
Over the trailing-five-year period, Vertex has grown its annual revenue by more than 130%, while annual profits have increased in the ballpark of 200%. The company has also grown its free cash flow by more than 130% in that timeframe.
Shares have risen by more than 170% over the last five years, crushing the S&P 500's performance in that window. Given the company's exceptional financial foundation, considerable moat in existing markets, and rapid advancements into new, underserved therapeutic areas, it's not a stretch of the imagination that this healthcare stock could deliver superior returns to investors well into the next decade.
2. MercadoLibre
MercadoLibre (NASDAQ: MELI) is known as the leader in e-commerce and fintech in Latin America. It has a significant total addressable market opportunity, and MercadoLibre controls about one-fifth of all e-commerce sales generated in Latin America.
Brazil and Mexico are the two largest e-commerce markets in the region. With its fintech and e-commerce businesses, MercadoLibre's footprint is estimated to cover about 27% of these markets in Brazil and 14% in Mexico. In the first quarter of 2024, MercadoLibre's gross merchandise volume in Brazil and Mexico rose 30% year over year on a currency-neutral basis.
The company's presence spans 18 countries. Its ecosystem of brands includes:
- flagship e-commerce marketplace Mercado Libre
- fintech platform Mercado Pago
- logistics service Mercado Envios
- retail ads business Mercado Ads
- online storefronts solution Mercado Shops
- Mercado Libre Classifieds service.
In its core markets, MercadoLibre also sells point-of-sale devices, digital payment solutions, prepaid cards and debit cards, merchant and consumer credits available both online and offline, and even savings and investment products that users can leverage to invest balances kept in their Mercado Pago accounts.
Over the trailing 12 months, MercadoLibre has generated revenue of more than $15 billion, with profits surpassing $1.1 billion. Its trailing-12-month operating cash flow position is around $5.8 billion at the time of this writing. The company has also generated a free cash flow of approximately $3.8 billion in that time frame.
In the first quarter of 2024, MercadoLibre delivered net revenue of $4.3 billion, a 36% year-over-year increase, or a whopping 94% if you factor out currency exchange headwinds. Total payment volume in the platform rose 35% year-over-year to $40.7 billion, while gross merchandise volume increased 20% to $11.4 billion. Those year-over-year increases were 86% and 71%, respectively, on a foreign exchange-neutral basis.
MercadoLibre's family of brands encompasses the full spectrum of fintech and e-commerce needs both online and offline. This is an important point, as internet penetration in Latin America is around 70%, meaning that close to 30% of potential buyers in the region do not have access to reliable internet. However, the region does boast the fastest-growing e-commerce and internet penetration rates globally.
Given MercadoLibre's existing footprint, it has a significant advantage to launch itself to future growth even as competition grows in its broader addressable market. Shares have more than doubled over the last few years, and its strong financial growth could easily maintain that trajectory. Investors might want to take a slice of the action sooner than later.
Should you invest $1,000 in Vertex Pharmaceuticals right now?
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Rachel Warren has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CRISPR Therapeutics, MercadoLibre, and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.
