Forecast: These are the best growth stocks through 2030

When it comes to investing in the right companies for your portfolio, you need to make sure you choose businesses that you understand and that have the competitive advantages, financial strengths and leadership necessary to deliver sustainable growth.

If you’re looking for growth stocks that have what it takes to do well for investors not just now but over the next five years and beyond, there are plenty of candidates to consider. Here are two that look like great additions to a long-term investor’s portfolio.

1.Vertex Pharmaceutical Company

Vertex Pharmaceuticals (VRTX -2.24%) is not a household name like some other healthcare companies, but it should be a strong contender for the long-term investor looking for a profitable company with a strong growth trajectory. Vertex has been a leader in the cystic fibrosis therapy market for years.

Vertex is the only company with approved drugs to treat the underlying cause of CF. The majority of its revenues currently come from a single drug, Trikafta, which is approved to treat more than 90% of the CF population in the U.S.

This drug won’t face a patent cliff for more than a decade. Vertex is building its pipeline of potential blockbusters that could transform the business in the coming years.

Vertex and its development partner CRISPR Therapybecame the first to receive approval for a CRISPR therapy in late 2023. The therapy is called Casgevy and is intended to be a one-time functional cure for sickle cell disease and transfusion-dependent beta-thalassemia.

Specific patient cohorts with these diseases are covered by the current approvals, and Vertex is initially focused primarily on patients in the US and Europe, an addressable market of approximately 32,000 people. However, it should be recognized that there are many millions of people with these blood diseases worldwide.

Vertex has a number of other promising products in the pipeline that it expects to bring to market in the next few years, including a new triple-combination cystic fibrosis therapy that just received a New Drug Application from the U.S. Food and Drug Administration, and suzetrigine, a non-opioid drug intended to treat moderate to severe acute pain, as well as neuropathic pain.

Over the past five years, Vertex has grown its annual revenue by more than 130%, while annual profits have increased by about 200%. During the same period, the company has also increased its free cash flow by more than 130%.

The stock has increased in value by more than 170% over the past five years, which means a decline S&P500performance in this window. Given the company’s exceptional financial fundamentals, significant advantages in existing markets, and rapid progress in new, underserved therapeutic areas, it’s no exaggeration that healthcare stocks could provide investors with higher returns well into the next decade.

2. MercadoLibre

MercadoLibre (MELIA 10.59%) is known as a leader in e-commerce and fintech in Latin America. It has a significant total available market opportunity, with MercadoLibre controlling 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. MercadoLibre’s reach, through its fintech and e-commerce businesses, is expected to cover around 27% of these markets in Brazil and 14% in Mexico. In Q1 2024, MercadoLibre’s gross merchandise volume in Brazil and Mexico grew by 30% year-over-year on a currency-neutral basis.

The company’s presence spans 18 countries. Its brand ecosystem includes:

• flagship e-commerce marketplace Mercado Libre
• fintech platform Mercado Pago
• Mercado Envios logistics service
• retail ads business Mercado Ads
• Mercado Shops online storefront solution
• Mercado Libre advertising service.

In its main markets, MercadoLibre also sells POS devices, digital payment solutions, prepaid and debit cards, merchant and consumer loans available both online and offline, and even savings and investment products that users can use to invest the funds accumulated in their Mercado Pago accounts.

Over the past 12 months, MercadoLibre has generated revenues of over $15 billion, with profits exceeding $1.1 billion. At the time of writing, the cash flow position from operating activities over the past 12 months is approximately $5.8 billion. The company also generated free cash flow of approximately $3.8 billion during the period.

In Q1 2024, MercadoLibre generated net revenue of $4.3 billion, up 36% year-over-year, or a whopping 94% if we exclude currency headwinds. Total payments volume on the platform increased 35% year-over-year to $40.7 billion, while gross merchandise volume increased 20% to $11.4 billion. Year-over-year increases were 86% and 71%, respectively, assuming currency neutrality.

The MercadoLibre family of brands covers the full spectrum of fintech and e-commerce needs both online and offline. This is an important point because 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 boasts the fastest growing e-commerce and internet penetration rates in the world.

Given MercadoLibre’s current reach, it has a significant head start to jump-start future growth, even as competition in its broader addressable market intensifies. The stock has more than doubled in the past few years, and its strong financial growth could easily continue that trajectory. Investors may want to get in on the action sooner rather than later.