The 2010s was an era of dramatic growth for the stock market. Climbing out of the depths of the financial crisis, growth stocks soared as interest rates fell to rock-bottom levels. Investors also returned to the market as stock growth, and eventually jobs, made a comeback.
On Jan. 1, 2010, the S&P 500 stood at 1,123.58. This year, it finally broke through the 3,000 level. It stands at around 3,120 as of the time of this writing. This represents an increase of almost 178% in the 2010s.
However, some growth stocks saw increases far exceeding that level. As technological change and the creative destruction of capitalism both birthed and destroyed industries, some long-term investors saw massive returns. Some of these equities received a significant amount of coverage in the financial press. Others remain unknown to much of the investing public.
Still, the changes brought about by these forces will likely bring new growth stocks for the 2020s. Hence, one cannot assume this growth should continue. However, by understanding the influences that grew the following equities, investors can help themselves to prepare for hopefully a new roaring ’20s.
Domino’s Pizza (DPZ)
Split-adjusted closing price on Dec. 31, 2009: $7.20
Approximate price today: $288 per share
Gain in 2010s: 3,889%
Seeing Domino’s Pizza (NYSE:DPZ) stock at the top of the list might come as a surprise. The first Domino’s opened in 1960. The pizza chain began offering the “30-minute guarantee” for pizza delivery in 1973. However, it dropped the 30-minute guarantee in 1993 following a lawsuit, and the pizza chain suffered well into the 2000s due to numerous challenges.
However, in 2010, J. Patrick Doyle took over as CEO. Doyle acknowledged the issues facing Domino’s and initiated a successful marketing campaign. He also adjusted to the times as a significant portion of the order process shifted to online platforms. DPZ stock soared as both customers and investors responded well to the changes.
Still, as one of the top growth stocks, DPZ faces new challenges. Richard Allison took over as CEO in July 2018. Now delivery services such as Uber (NYSE:UBER) and Grubhub (NYSE:GRUB) enable deliveries for more of its competitors.
The projected average earnings increase of 12.8% per year for the next five years appears solid. However, at a forward price-to-earnings ratio of around 27, that growth does not come cheap. Investors should watch carefully as DPZ stock faces a bright if somewhat uncertain future.
Split-adjusted closing price on Dec. 31, 2009: $7.87 per share
Approximate price today: $305 per share
Gain in 2010s: 3,773%
Seeing Netflix (NASDAQ:NFLX) on this growth stocks list does not come as a surprise. The company first pioneered the DVD mail-order and streaming industries. Both events forced the video store industry and companies such as Blockbuster Video and Hollywood Video to close their doors.
This industry also had the effect of making much pricier cable-TV plans less desirable. Both trends helped NFLX stock to skyrocket.
However, the 2020s may look much different for Netflix stock. The success of streaming has brought competition from many sectors. Of those, Disney (NYSE:DIS) has become the most notable threat. A formidable content library and a streaming service for sports could blunt further gains in NFLX stock for the foreseeable future. Netflix has also damaged its balance sheet by taking on massive debts to keep up in the content race.
The forward P/E ratio of 55 has come down in recent years. Also, the market capitalization has now risen to almost $134 billion. However, analysts project the profit growth rate of an average of 42.2% per year over the next five years. While NFLX stock will likely see much slower growth in the 2020s, international expansion could still take it higher.
MarketAxess Holdings (MKTX)
Split-adjusted closing price on Dec. 31, 2009: $12.48 per share
Approximate price today: $370 per share
Gain in 2010s: 2,864%
The massive growth over the last ten years has failed to make MarketAxess (NASDAQ:MKTX) a household name among growth stocks. Perhaps this is because the New York-based international fintech company deals little with the general public. Instead, it enables institutional investors and broker-dealers to trade several types of fixed-income products.
MKTX stock generates most of its income from commissions. It grew as investors showed an increasing interest in bonds during the 2010s.
Despite the impressive 2,864% growth over the last ten years, I would hesitate to buy it now. Wall Street predicts earnings increases will average 15.7% per year over the next five years. However, 60.1 times forward earnings seems pricey for such a growth rate.
Still, I recommend keeping MKTX stock on a watch list. At a market cap of around $14 billion, it could have room to grow long term. A hiccup in bonds or the overall market could interrupt its move higher. If the P/E ratio falls more in line with the growth rate, I think MarketAxess will again become a buy.
Split-adjusted closing price on Dec. 31, 2009: $8.07 per share
Approximate price today: $221 per share
Gain in 2010s: 2,638%
Like MarketAxess, the growth of DexCom (NASDAQ:DXCM) has also occurred without a significant amount of public attention. Based in San Diego, this company commercialized glucose monitoring. This has only grown in significance as the aging of the baby-boom population sparks a rise in cases of diabetes.
Moreover, about 10,000 baby boomers age into Medicare every day. Analysts expect this trend to endure for most of the next decade. DXCM stock should rise along with it. From an investor standpoint, this and the population already on Medicare helps to make monitoring more affordable.
The rise in DXCM stock has left it with a forward P/E of around 122. At such levels, investors should remain cautious. However, Wall Street also expects earnings increases expected to average 78% per year over the next five years. Hence, traders can easily see why DexCom stock attracts such a premium.
Admittedly, we all want to see a cure for diabetes. If this occurs, it could devastate DXCM stock. However, as long as it remains a health issue covered by Medicare, DexCom should remain one of the top growth stocks.
Exact Sciences (EXAS)
Split-adjusted closing price on Dec. 31, 2009: $3.39 per share
Approximate price today: $86 per share
Gain in 2010s: 2,430%
Consumers may not know the company Exact Sciences (NASDAQ:EXAS) well. However, it has become one of the top growth stocks for a product the public knows better, Cologuard. Thanks to Cologuard, patients can diagnose colon cancer early. Cologuard can do this without an invasive and more expensive colonoscopy. This reduces medical costs and means more people can detect colon cancer before tumors spread to other parts of the body.
The Food and Drug Administration approved Cologuard in 2014. Consequently, nearly all of the stock price growth occurred after 2015. Moreover, despite the benefits of Cologuard, analysts do not forecast a profit for EXAS stock until 2021. At a price-to-sales ratio of 17, it has become an expensive investment. However, with revenue nearly doubling every year, investors have shown willingness to pay such a multiple.
The benefits of Exact Sciences’ popular product do not need an explanation. As long as this patent remains in force, I see growth continuing for EXAS stock despite the massive increase in the second half of the 2010s.
Split-adjusted closing price on Dec. 31, 2009: $8.73 per share
Approximate price today: $188 per share
Gain in 2010s: 2,076%
Abiomed (NASDAQ:ABMD) makes medical devices to help the pumping functions within the human heart. They have also developed artificial hearts.
Admittedly, ABMD stock might have become the biggest of the growth stocks had this analysis occurred at a different time. The pace of growth began to accelerate in 2014. By October 2018, Abiomed peaked at $459.75 per share. However, ABMD stock began to fall when the FDA warned of risks from its Impella RP heart pump. Still, the declines may have stopped as the FDA deemed the Impella RP “safe and effective” back in May. Since August it has rarely risen above $200 per share. Today, it trades at about $188 per share.
Thanks to the decline, the forward P/E ratio has fallen to around 37. Profits fell this year. However, double-digit earnings increases should return next year. For the next five years, analysts predict earnings will rise by an average of 24% per year. Like DexCom, it will also benefit as more Americans age into Medicare. As this helps to lead more patients to its heart treatments, ABMD stock should resume its growth pattern.
Split-adjusted closing price on Dec. 31, 2009: $15.34 per share
Approximate price today: $315 per share
Gain in 2010s: 1,939%
The San Jose-based semiconductor company Broadcom (NASDAQ:AVGO) has made itself one of the most significant growth stocks primarily through buying other companies. Formerly known as Avago Technologies, it got its name when it bought another semi company called Broadcom in 2015.
Still, AVGO has faced some controversy. Its business with Huawei likely led President Donald Trump’s administration to block the Qualcomm (NASDAQ:QCOM) purchase. This came even though the company moved its headquarters back to San Jose after basing its operations in Singapore for a time.
However, AVGO stock should grow on future acquisitions. Also, despite its move higher, AVGO stock remains cheap. It currently trades at a forward P/E ratio of about 13.5. Moreover, analysts forecast earnings increases, which have stagnated recently, to return to double-digit levels. They predict almost 17% per-year average growth for the next five years.
The ties to China may give some investors pause. However, as China and the U.S. resolve their disputes, AVGO stock should continue its growth well into the 2020s.
Jazz Pharmaceuticals (JAZZ)
Split-adjusted closing price on Dec. 31, 2009: $7.88 per share
Approximate price today: $150 per share
Gain in 2010s: 1,789%
Dublin, Ireland-based Jazz Pharmaceuticals (NASDAQ:JAZZ) develops treatments in the areas of sleep as well as hematology and oncology. It derives the majority of its revenue from a drug called Xyrem. However, it has transitioned to newer therapies such as Erwinaze, Defitelio and Vyxeos.
Despite its huge run-up, it could again become one of the more prominent growth stocks in the 2020s. For now, it sells at a forward P/E ratio of about 8.7. Also, even with the low multiple, revenue growth remains at double-digit levels. Moreover, Wall Street foresees average earnings increases of 11.1% per year for the next five years.
Still, JAZZ stock made the majority of its gains in the first half of the decade. In recent years, it has suffered as Xyrem patents have expired. Also, lagging sales of blood-cancer drug Erwinaze hit JAZZ as it struggles with supply and manufacturing issues. It still trades well below the highs of 2015, when it almost reached $195 per share.
However, as new drugs replace Xyrem, and as the firm resolves manufacturing issues with Erwinaze, JAZZ stock should finally resume its growth.
United Rentals (URI)
Split-adjusted closing price on Dec. 31, 2009: $9.81 per share
Approximate price today: $157 per share
Gain in 2010s: 1,520%
United Rentals (NYSE:URI) rents heavy equipment to the construction industry. This business model has made URI one of the more successful growth stocks. United Rentals traded in penny-stock status at the height of the financial crisis. This drop helped it to become one of the bigger success stories of the 2010s.
But even growth stocks are not immune to challenges. URI stock faced ratings cuts in the fall as some thought recession fears would reduce demand for construction equipment.
These fears have made URI stock appear inexpensive. The equity now sells for about 7.8 times next year’s earnings. At first, it may look cheap since Wall Street predicts an earnings increase of 18.3% for the year.
However, recession fears still appear to influence estimates in future years. Profits are on track to rise by only 4.3% next year and an average of 2.2% per year for the next five years.
The economy should determine its immediate future. If we enter a recession, URI will suffer for a time. However, if these fears prove to be overblown, United Rentals could continue its impressive growth well into the 2020s.
Align Technology (ALGN)
Split-adjusted closing price on Dec. 31, 2009: $17.82 per share
Approximate price today: $275 per share
Gain in 2010s: 1,449%
Align Technology (NASDAQ:ALGN) produces digital scanners for the dental industry, as well as Invisalign, a product described as “invisible braces.” Both patients and investors have taken to Align as its products serve as a replacement for traditional metal braces.
ALGN stock rose steadily during the first half of the decade. However, it became one of the better growth stocks as the popularity of Clear Aligner reached a fever pitch.
Still, as it approached $400 per share in the fall of 2018, soft earnings guidance led to a sharp selloff. It would go on to lose more than half of its value before recovering to the current level of around $275 per share.
Furthermore, even with the drop, the price remains well ahead of fundamentals and growth. The forward P/E ratio now stands at close to 42.5. That seems high for a company with expected profit growth averaging of 18.9%.
Moreover, this estimate could come down as competitors such as SmileDirectClub (NASDAQ:SDC), Candid and others begin to take market share. Although ALGN stock has served investors well over the previous decade, the party may end soon as competition forces reductions in both the price and market share of Invisalign.
As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting.