Rising interest rates have pushed many investors away from growth stocks over the past year. That sell-off is not surprising, as valuations of many growth stocks have risen to unsustainable levels in the past year.
On the bright side, that pullback has created some great buying opportunities in quality stocks. So today, I’m going to cut through the nearby noise and take a closer look at three great names: Service Today (NOW 0.02%), Salesforce (CRM -0.22%)and MercadoLibre (MELI -0.06%) — which could easily triple a $10,000 investment today to more than $30,000 by the end of the decade.
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1. Today’s Service
ServiceNow helps companies organize their disorganized work patterns into streamlined cloud-based workflows. That approach helps companies reduce costs, improve efficiency, scale their operations, and optimize their business models for hybrid and remote workers.
Annual revenue grew from $1.4 billion in 2016 to $5.8 billion in 2021, representing a five-year compound annual growth rate (CAGR) of 33%. Its adjusted earnings per share (EPS) increased at a CAGR of 53%.
ServiceNow already serves about 80% of the Fortune 500, but it still expects to generate at least $16 billion in revenue by 2026. That implies its revenue will grow at a CAGR of more than 22.5% from 2021 to 2026.
ServiceNow’s stock isn’t cheap at 14 times this year’s sales, but it can maintain its premium price-to-sales ratio if it hits its long-term target. If that happens, its stock could easily double or triple by the end of 2026.
2. Salesforce
Salesforce is another cloud-based service company that streamlines tasks for large companies. Its main platform for CRM (customer relationship management) enables companies to carefully monitor and analyze their individual customer relationships. It also provides services for sales, marketing, analytics, and data visualization purposes.
Between fiscal 2017 and fiscal 2022, which ended this January, Salesforce’s revenue grew at a CAGR of 26% from $8.4 billion to $26.5 billion. Its adjusted EPS grew at a CAGR of 36%, even as it made several large acquisitions to expand its cloud-based ecosystem.
Like ServiceNow, Salesforce has set firm targets for its long-term growth. It believes its annual revenue will exceed $50 billion by fiscal 2026, indicating that its revenue will grow at a CAGR of 17% over the next four years. Salesforce stock isn’t expensive at six times sales this year, and it could get even higher as it marches toward its $50 billion goal.
So I believe that Salesforce stock could double by the beginning of calendar 2026. If it can continue to grow its revenue at a CAGR of 15% to 20% over the next four years, it could easily triple by 2030. .
3. MercadoLibre
MercadoLibre is the largest e-commerce company in Latin America. It operates in 18 countries, but generates most of its revenue in Brazil, Argentina, and Mexico. It also operates Mercado Pago, one of the region’s largest digital payment platforms.
MercadoLibre’s revenue grew from $844 million in 2016 to $7.1 billion in 2021, representing a whopping CAGR of 53%. Its total unique active users rose from 74.2 million in 2019 (the first year it disclosed that metric) to 139.5 million in 2021. Revenue growth remained uneven as it expanded its ecosystem, but gross margins it continues to expand as economies take off.
MercadoLibre hasn’t set any ambitious long-term growth targets, but the expanding Latin American e-commerce market gives it plenty of room to grow. According to Morgan Stanleythe region’s e-commerce penetration rate could double from 8% in 2021 to 16% in 2025.
In comparison, China and the US both have e-commerce penetration rates of more than 20%. If Latin America can catch up to those mature markets, MercadoLibre’s stock could easily double or triple by 2030 — if it fends off its smaller competitors and remains the region’s e-commerce leader.
Leo Sun has positions in MercadoLibre and Salesforce, Inc. The Motley Fool has positions in and recommends MercadoLibre, Salesforce, Inc., and ServiceNow, Inc. The Motley Fool has a disclosure policy.