3 unstoppable multibaggers that are up between 965% and 3,450% since 2014 after a recent pullback

Latin American e-commerce and fintech giant MercadoLibre has already become a 65-bagger for investors since its 2007 IPO, including a 1,220% increase in value over the past decade. Despite these incredible returns, the best could still lie ahead for the company. Management estimates that Latin American e-commerce is about a decade behind the U.S. market.

Over the past decade, even as the U.S. market has matured, Amazon has grown its revenue sevenfold, underscoring the growth momentum that could still lie ahead of MercadoLibre. By growing the number of unique buyers, active fintech users and revenue by 21%, 35% and 35% respectively in the third quarter, MercadoLibre continues to prove that it is on its way to becoming the Amazon of Latin America.

However, operating margin and net profit margin fell during the quarter, recently prompting a 13% decline in the company’s share price. But with capital expenditure (capex) up 77% from Q3 2023, this declining profitability isn’t an indictment on MercadoLibre stock in my opinion. Instead, it shows that management is happy to trade short-term profits for long-term cash flows by reinvesting in its business.

By investing in its logistics network to serve the underpenetrated Latin American e-commerce market while building out its loan portfolio to help the underbanked, the company’s focus on benefiting its users is more important to me than 90-day profits . MercadoLibre’s return on invested capital (ROIC) continues to rise – which has historically led to a stock’s outperformance – making me confident that capital expenditures will pay dividends further into the future.

MercadoLibre currently trades at five times sales – half its average valuation over the past decade – making the recent dip a perfect opportunity to add to this multibagger.

Five years ago, Wingstop stock was trading at around $60 per share, with a price-to-earnings (P/E) ratio of more than 100. The stock has risen fivefold since then, while its P/E ratio has shrunk slightly to 90.

The reason I point this out is that it’s very easy to ignore investing in Wingstop these days because it seems extremely expensive. That said, the company is quickly proving to be a shining example of believing in the idea that buying a premium company at a fair price is better than buying an average company at a cheap price.

Wingstop is the largest chicken wing-focused fast-casual chain in the world and now has nearly 2,500 stores. This is reflected in the share price, which has risen 965% over the past ten years. However, the restaurant chain has ambitions to grow to more than 4,000 locations in the US alone, and another 3,000 internationally.

And it is firing on all cylinders to achieve this goal.

Wingstop added 106 new stores in the third quarter, increasing its store count by 17% compared to last year. But this was only part of the company’s staggering growth. By increasing same-store sales by 21%, Wingstop achieved total sales growth of 39%.

However, because earnings per share only grew 32% during the quarter, missing analyst expectations. Wingstop’s stock price plummeted 26% from its 52-week high. Ultimately, I believe this pullback gives investors an opportunity to buy shares of one of the best composite companies on the market at a discount.

Wingstop has a high and rising ROIC of 38%, demonstrating its ability to continue to grow in a hugely profitable manner through its franchise model. The best part yet is that since 90% of new locations are opened by existing franchisees, the odds of success for a new location are quite high considering its notoriety.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Josh Kohn-Lindquist has positions in Celsius, Costco Wholesale and MercadoLibre. The Motley Fool holds positions in and recommends Amazon, Celsius, Costco Wholesale, MercadoLibre, and Monster Beverage. The Motley Fool recommends Wingstop. The Motley Fool has one disclosure policy.

3 unstoppable multibaggers that are up between 965% and 3,450% since 2014 after a recent pullback was originally published by The Motley Fool