2 growth stocks that might explode in the near future

Growth stocks can be some of the best investments I could make for their earnings potential. Here are my two favourites at the moment.

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Over the last 20 years, growth stocks have handed shareholders some of the best returns that the stock market has to offer.

Take Amazon, for example. A £10,000 stake in 2003 would have surged 10,079% to become over a million at today’s share price.

While that’s hardly typical, it does show what’s possible. And there are two stocks I own that I think have the potential to shoot up in the coming years.

Should you invest £1,000 in Games Workshop right now?

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Games Workshop

The first stock I’m excited about is tabletop gaming company Games Workshop (LSE: GW). Its share price has already grown over 20 times from £4.23 to £98.30 inside the last decade. 

Created with Highcharts 11.4.3Games Workshop Group Plc PriceZoom1M3M6MYTD1Y5Y10YALL16 May 202216 May 2023Zoom ▾Jul '22Sep '22Nov '22Jan '23Mar '23May '23Jul '22Jul '22Oct '22Oct '22Jan '23Jan '23Apr '23Apr '23www.fool.co.uk

This growth shows what a good job it’s been doing building its brand. In fact, from 2016 to 2022:

  • Revenue increased from £118m to £414m
  • Margins increased from 11% to 31%
  • Net income increased from £13m to £128m
  • The total market cap grew to £3.2bn from only £161m

A Henry Cavill TV series

As impressive as all that is, I think it might just be the start here. As what’s really exciting is the potential of its Warhammer intellectual property.

Other fictional worlds like Star Wars, Marvel or Lord of the Rings have had outrageously successful – and lucrative – TV shows and movies. 

And only last year, Amazon struck a deal with the firm to create a Warhammer series starring Henry Cavill. If that goes on to have success like those other big franchises, then I’d expect my Games Workshop shares to move much higher.

It’s worth mentioning that the show hasn’t even been filmed yet, so any success is not at all guaranteed.

Tesla

My second choice, electric vehicles (EV) manufacturer Tesla (NASDAQ: TSLA), needs little introduction. 

The carmaker has already grown at a 40% compound annual growth rate (CAGR) for the last 10 years. That’s thanks to its success in producing desirable EVs, taking a 65% share of that market.

Created with Highcharts 11.4.3Tesla PriceZoom1M3M6MYTD1Y5Y10YALL16 May 202216 May 2023Zoom ▾Jul '22Sep '22Nov '22Jan '23Mar '23May '23Jul '22Jul '22Oct '22Oct '22Jan '23Jan '23Apr '23Apr '23www.fool.co.uk

But its success does present an obvious question: is the growth phase already over? 

Musk’s latest vision

Personally, I don’t think so. And the reason is its owner Elon Musk has a much grander vision. He wants Tesla to put self-driving vehicles on roads all around the world.

The company that introduces safe and effective autonomous vehicles will surely see huge growth. It’s like creating the same productivity as millions of taxis and lorry drivers in one fell swoop.

And Tesla looks well placed here. First off, the firm’s vertical integration – making its own batteries, having its own repairs, and the like – means the company trounces its competitors when it comes to margins. 

TeslaToyotaHondaGMFordStellantis
2022 Net Margin15.5%6.9%4.80%6.20%-1.4%9.2%

That’s a lot more cash to spend on research and testing its autonomous vehicles. 

But also, Musk’s latest move was to slash thousands off the prices of his cars. By doing this, he thinks Tesla can gain further market share to give itself an untouchable advantage in self-driving technology.

For me, the biggest risk here is simply that other investors agree with me. Today’s share price of $172 bumps the price-to-earnings ratio up to an expensive-sounding 50. 

But even at that price, I think Tesla can join Games Workshop on my list of stocks that I’m extremely bullish about for their future growth potential.

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Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. John Fieldsend has positions in Games Workshop Group Plc and Tesla. The Motley Fool UK has recommended Amazon.com, Games Workshop Group Plc, and Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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