Great companies can deliver meaningful portfolio growth in a wide range of economic and market environments. From established companies to emerging businesses, the types of stocks you favor will depend on numerous factors, including your personal financial goals, risk tolerance level, and investment style.
If you're looking for compelling growth stocks and have $500 to invest right now, here are two names to consider the next time you add to your buy basket.
1. Vertex Pharmaceuticals
Vertex Pharmaceuticals (NASDAQ: VRTX) has a virtually unchallenged position on a lucrative segment of the rare disease drug market. The company is the only one to have commercialized drugs on the market that treat the underlying root cause of the genetic ailment cystic fibrosis. This portfolio of drugs, known formally as cystic fibrosis transmembrane conductance regulator (CFTR) modulators, are led by the company's flagship therapy, Trikafta.
When Trikafta was approved a few years ago by the U.S. Food and Drug Administration (FDA) to treat patients with the most common cystic fibrosis gene mutation, it represented a major shift for this patient population. At that time, Trikafta's approval covered roughly 90% of the U.S. patient population, and label expansions have broadened its reach since that time. Trikafta won't be facing a patent cliff for another 13 years or so, and by then, Vertex should have plenty of other blockbusters in its portfolio.
One such example is its new triple-combination cystic fibrosis therapy, which must only be taken once a day instead of Trikafta's twice-daily regimen. The FDA just accepted Vertex's New Drug Application for the triple-combination therapy, with a target action date of January 2, 2025.
Not only did this new therapy match up to Trikafta in terms of improving lung function, but it actually demonstrated superiority to its predecessor when it came to lowering levels of sweat chloride. Patients with cystic fibrosis face numerous physical challenges, including enhanced mucus in the lungs and digestive system as well as excessive levels of sweat chloride.
In addition to this upcoming therapy, Vertex is expecting another launch in the next few years: Its non-opioid acute pain candidate, suzetrigine. The drug is being studied in moderate to severe acute pain ailments, as well as for patients with diabetic peripheral neuropathy. A pain drug that could promise far greater relief than over-the-counter drugs can provide without the addictive qualities of opioids could represent billions in additional revenue for the business.
Vertex is also currently in the process of launching Casgevy, the gene-editing therapy that it developed with CRISPR Therapeutics which is designed to be a one-time functional cure for transfusion-dependent beta thalassemia and sickle cell disease. Casgevy is widely expected to be a blockbuster product for the company. The rollout will take time, since preparing and administering a CRISPR therapy is a highly involved process that involves extracting cells from the patient. The patient undergoes chemotherapy to prime the infusion area, and receives edited cells back into their body to form the proper amount of fetal hemoglobin.
In the meantime, looking at the company's performance over the trailing 12 months, Vertex has brought in profits of about $4 billion on revenue of over $10 billion. It's also raked in operating cash flow in the ballpark of $4 billion, with free cash flow of approximately $3.3 billion in that time frame. Investors who want a slice of a compelling healthcare stock that they can buy and hold forever would do well to take a second look at Vertex Pharmaceuticals.
2. Toast
Toast (NYSE: TOST) was launched in 2011, and has grown to become a leading provider of software and hardware solutions for restaurants around the world. The company's ecosystem of core offerings includes point of sale and restaurant operation solutions, fintech solutions, marketing and digital storefront solutions, and even offerings that enable optimal supply chain and accounting management.
The company generates revenue in three primary ways. The first is from subscription services that are charged to its restaurant customers for the use of its various software applications. Its second key source of revenue is from various financial technology solutions, and involves transaction-based fees that restaurants pay to facilitate purchases.
Toast also generates financial technology solutions revenue from other sources. These include fees from marketing and servicing loans through its Toast Capital offering, which gives eligible restaurants access to loans as small as $5,000 up to $300,000, all of which are originated by third-party bank partners. Finally, Toast generates revenue from hardware and professional services, including sales of tablets, terminals, and handheld devices.
As of the end of the first quarter of 2024, Toast's offerings were being used across 112,000 restaurant locations, a healthy 32% increase from the same quarter in 2023. Toast added 6,000 net new locations in the three-month period alone. It also reported an annualized recurring run rate of $1.3 billion, up 32% from one year ago.
Toast helped process gross payment volume of $34.7 billion in Q1, up 30% from one year ago. The company's total revenue of $1.1 billion was up 31% on a year-over-year basis. Of that total, $873 million came from its financial technology solutions segment, $151 million from subscription services, and $51 million from hardware and professional services.
Toast is still reporting negative net income under generally accepted accounting principles ( GAAP ). However, it did report a gross profit of $249 million in Q1 2024, up 43% from one year ago. Investors have poured cash into the stock recently, with shares trading up 40% from the start of 2024 alone.
While the company has work to do to get to profitability, its business model is founded on serving the broad spectrum of essential operational and financial needs that restaurants contend with on a daily basis. Toast is witnessing growing adoption of its products and services, which is translating to steady customer and revenue growth. Those willing to invest in a slightly riskier stock, given its currently unprofitable state, may find that the potential of this business is worth a second look.
Rachel Warren has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CRISPR Therapeutics, Toast, and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy .
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