Recent months have been brutal for stock market investors primarily due to a challenging macro environment. However, the ongoing selloff provides long-term investors a chance to derive outsized gains once market sentiment improves.
A massive pullback in valuations of growth stocks across sectors has created enticing opportunities for you to turn $10,000 into $50,000 by 2030. Here are two top stocks that can help you deliver five-fold returns by the end of the current decade.
Image source: Getty Images
Datadog stock
A monitoring and security platform for cloud applications, Datadog (NASDAQ: DDOG) is valued at a market cap of US$21 billion. Down 66% from all-time highs, Datadog has the potential to outpace the broader markets consistently.
In the fourth quarter (Q4) of 2022, Datadog reported sales of US$469 million — an increase of 44% year over year. It ended the year with 23,200 customers compared to 18,800 in 2021. Moreover, Datadog ended 2022 with 2,780 customers that generate annual recurring revenue of US$100,000, up from 2,010 customers in the year-ago period. The number of customers with an ARR of over US$1 million also rose from 216 to 317 in this period.
Datadog’s free cash flow in Q4 stood at US$96 million, indicating a healthy margin of 21%. Additionally, its dollar-based net retention rate was about 130%, which suggests existing customers increased spending on the Datadog platform by 30% in the last 12 months.
An increase in product usage and adoption will continue to drive Datadog sales higher over time. Analysts tracking the tech stock expect sales to touch US$2.68 billion in 2024, up from US$1.68 billion in 2022. Its adjusted earnings are forecast to increase from US$0.98 per share in 2022 to US$1.49 per share in 2024.
So, DDOG stock is priced at eight times forward sales and 44 times forward earnings, which might look steep. But Datadog is a high-flying growth stock that continues to expand its product portfolio and customer base at a rapid clip.
Analysts expect Datadog stock to surge almost 50% in the next 12 months.
BRP stock
A leader in the powersports vehicles industry, BRP’s (TSX: DOO) portfolio of products includes snowmobiles, watercraft, off-road vehicles, boats, marine propulsion systems, and recreational aircraft.
In fiscal 2023 (ended in January), BRP reported revenue of $10 billion, up from $6 billion in fiscal 2020. While revenue was up 31% year over year, adjusted earnings surged 15% to $10.67 per share in fiscal 2023.
“We achieved record results for the year with revenues exceeding $10 billion for the first time ever, solid profit margins and normalized EPS [earnings per share] above our guidance range … We are proud of our outstanding fourth quarter retail performance as we significantly outpaced the Powersports industry and concluded the year with an exceptional five percentage points market share increase over the previous year in North America,” said José Boisjoli, president and chief executive officer of BRP.
BRP’s widening profits and cash flows allow the company to pay shareholders a quarterly dividend of $0.18 per share, translating to a forward yield of 0.7%. But these payouts have risen by 15% annually in the last six years. The company can easily increase its dividends going forward, given it has a payout ratio of less than 10%.
BRP stock is priced at 8.3 times forward earnings and 0.75 times forward sales, which is very cheap for a company growing at a consistent pace.
Down 18% from all-time highs, BRP stock has already returned 348% to shareholders since its initial public offering in April 2013. Its currently priced at a discount of 30% to consensus price target estimates.
