Growth stocks aren’t hard to find. They are ubiquitous and often spoken by some of the investment industry’s most prolific voices. A growth stock you can feel good about holding on to forever, however, is a different story. If we’re being honest, many investors rent most growth names instead of buying them long-term, hoping to cash in on a temporary craze.
With that as a backdrop, here’s a closer look at four great growth stocks with real, permanent staying power. The world will need their products and services for a long time, which bodes well for their underlying stocks even if they don’t generate much hype.
1. Generac Holdings
When most investors think of a home generator, they envision a dirty, gas-powered machine with two electrical outlets, to be dragged out and dusted in the event of a prolonged power outage.
That’s anything but the type of solutions Generac Holdings (GNRC 2.58%) brought to the table, though. Its modern generators are automated, remotely monitored, and connected to home or business wiring in a way that allows for continuous operation. And, more importantly these days, Generac’s portfolio provides energy storage solutions for solar panel systems that generate excess energy during the day to supply electricity at night.
In an environment where selfishness is king, Generac Holdings holds the proverbial key. While this year’s expected revenue growth of nearly 39% is a tough move to follow, the company’s expected follow-up growth rate of 9% for 2023 is still healthy. Earnings per share are expected to grow from last year’s $9.63 to $11.73 per share this year, on their way to a record-breaking $13.89 next year.
2. MercadoLibre
It is called Amazon of Latin America, although the description doesn’t do it justice. While MercadoLibre (MELI -2.98%) certainly has some similarities with Amazon, it can only be compared to PayPal as well as the eBaybringing together a diverse group of consumer-facing digital services in a relatively underserved market.
Deloitte puts some things into perspective, suggesting Argentina, Colombia, Mexico, and Peru — all important markets for MercadoLibre — will see economic growth of 3%, 5.8%, 1.8%, and 3.5%. (respectively) this year, followed by growth rates of 2.5%, 3.5%, 2%, and 3.1% next year. That’s growth across the economic impact on the region stemming from Russia’s invasion of Ukraine, which works disproportionately against Latin America and South America.
What Deloitte’s projection doesn’t point out, however, is how much of this market is still in the midst of a digital revolution. The GSMA forecasts that Latin America will be home to 100 million more smartphone owners by the end of 2025 than at the end of last year, while the Inter-American Development Bank reports that Latin America’s fintech ecosystem has expanded by 112% between 2018 and 2021. Meanwhile, the latest EBANX Beyond Borders report points out that Latin America is one of the hottest regions in the world for e-commerce growth, with online business expected to expand at least 29% per year until 2025 when it reached a whopping $829 billion.
In summary, it becomes a huge digital market, which plays right into all the hands that MercadoLibre holds.
3. Incite
You may be more familiar with the biopharma outfit Incyte (INCY -0.50%) than you realize. It’s the company behind leukemia drug Iclusig and arthritis treatment Olumiant.
Its claim to fame, however, is Jakafi, for myelofibrosis and polycythemia vera, which are cancers of the bone and blood, respectively. Incyte sold nearly $600 million worth of the drug last quarter alone, accounting for two-thirds of its revenue, which was up 29% year over year.
Jakafi is far from reaching its maximum earning potential, though. Analysts believe companywide sales are on pace to grow nearly 14% this year before accelerating to more than 15% next year.
The real story here, however, is revenue growth. While Incyte may be a bit of a one-trick pony, the pharmaceutical business is one of good measure. That means manufacturing and marketing costs don’t increase dollar for dollar with revenue when a new drug like Jakafi begins to be embraced by the medical community.
To this end, the analyst community is forecasting earnings per share of $3.20 this year, up 16% from last year, with 44% growth to a profit of $4.60 per share on the cards next year. year when inflation is (hopefully) tamed .
That growth train will stop chugging at some point, when its best-selling drug runs out of marketable uses and then begins to lose patent protection. However, the Jakafi-driven profits generated so far, means that Incyte must now be able to buy new drugs and fully fund pharmaceutical research and development with as much — if not more — potential.
In this vein, the company has 16 different molecular formulations currently in its R&D portfolio. That’s enough to keep Incyte busy for decades.
4. Today’s Service
Finally, add Service Today (NOW -3.25%) on your list of growth stocks to buy and hold forever.
It’s not a household name, but there’s a good chance you or someone in your household will benefit from its products. ServiceNow is one of the few companies in the digital workflow space; You’ll sometimes hear it referred to as automation software, although both terms can be loosely, broadly interpreted.
Whatever you call it, the result is the same: These tools allow most employees to create their own automated computer algorithms to automate tedious and repetitive tasks. ServiceNow offers a variety of workflow platforms custom-built for applications from communications to operations to asset management, and more.
And it’s good at what it does. For the second year in a row, information technology consulting outfit Gartner named ServiceNow’s strategic portfolio management platform as the market leader in agile planning tools. It has been named one of the top low-code application services options for several years in a row now.
The industry is due for a great more growth, too. Market research company Technavio expects the digital process automation market to expand at an average of more than 15% per year through 2026, matching Emergen Research’s outlook for more than 23% growth for the industry through 2030.
And ServiceNow is certainly getting more than its fair share of this growth. Analysts are modeling top-line growth of about 24% for this year and next, with earnings likely to grow at a faster clip.