Most investors know the stock market's long-term average annual return is in the ballpark of 10%. Most veteran investors understand that aggressive efforts to beat this average often result in you underperforming the average.
Every now and then, though, that risk is worth the reward.
With that as the backdrop, here's a rundown of three stocks with the potential to not just outperform the market over the course of the coming five years, but prospective five-baggers for the time frame in question. Just be sure to manage their above-average risk appropriately.
1. Dutch Bros
Dutch Bros(NYSE: BROS) is certainly no Starbucks, in terms of size or schtick. Of Starbucks' 40,576 worldwide stores, 17,049 of them are located in the United States versus Dutch Bros' 982 locales. Dutch Bros' coffee drive-thrus are also super-casual, whereas the Starbucks experience remains one that's very polished and uniform from one store to another.
The thing is, this authenticity -- and the personalization that tends to follow -- is precisely what consumers increasingly want. As evidence of this premise, Starbucks' same-store sales slumped 4% during the quarter ending in December, but Dutch Bros' same-store sales improved to the tune of 6.9%. Both numbers extend what are becoming longer-term trends too.
But a quintupling of the smaller company's stock price by 2030? That's a lot no matter how marketable Dutch Bros is making itself.
Except, maybe it's not so much.
Even before current CEO (and former Starbucks executive) Christine Barone took the helm at Dutch Bros back in 2023, the company was touting its ultimate target of 4,000 locales. Since taking over, Barone has continued to hold that figure up as a goal. This quintupling of its store count could turn out to be the catalyst for a fivefold increase of the stock's present price.
Such growth won't be cheap or easy to be sure. Indeed, it could require spending that temporarily weighs profits down even as it pumps revenue up. It may also involve shareholder dilution or additional debt.
Just keep the bigger picture in mind. Most young companies must spend a good deal of money to reach the size they ultimately want to reach. If you believe in Dutch Bros' customer engagement approach, you should also believe any such spending will ultimately bear fruit further down the road.
2. Joby Aviation
At one point the idea of a flying taxi was the stuff of science fiction. Not anymore. A company called Joby Aviation(NYSE: JOBY) is on the verge of making it happen.
OK, it's not quite what you might expect to see on an episode of The Jetsons. Joby's battery-powered aircraft seats four passengers and one pilot, and is largely intended to carry people to and from one hub (like an airport) to another hub (like the center of a city). These won't exactly be cheap trips, with early estimates putting the per-trip price at a couple hundred bucks per person.
That's not exactly miles away from the typical cost of a taxi ride or Uber, though.
Regardless of the cost, the company is moving forward with its plans. Joby said in its fourth-quarter investor presentation that it's expecting to start commercial operations near the end of this year or early next year. It just needs to tie up a few more loose ends with the FAA, like demonstrating to the regulatory agency that it can safely fly in New York's skies and then do the same in Los Angeles, although it's moving quickly in Dubai as well.
Like any other business of its ilk, look for Joby to get a slow and unprofitable start. This is a whole new kind of transportation service. Would-be customers may balk until it's well-proven.
Given the convenience of turning a one-hour car ride into a 10-minute flight, however, this company and its stock could (no pun intended) take off quickly once people are convinced. If all goes as hoped, a $1,000 investment in it now could easily grow to $5,000 by 2030.
3. Carnival
Finally, add Carnival(NYSE: CCL) to your list of stocks that could become a five-bagger over the course of the coming five years. You may know this company better as Carnival Cruise Line.
No discussion of this stock can rightfully ignore the upheaval the company and its peers suffered because of the COVID-19 pandemic. Like most others, Carnival took on a ton of debt just to survive this turbulent time -- over $30 billion worth of long-term debt that's now costing the company on the order of $2 billion in interest payments per year. That's a big chunk of its annual revenue of around $25 billion and operating income of just a little less than $4 billion. Then, just when investors began to believe the maritime cruise company was going to navigate its way around fiscal trouble, inflation materialized... and lingered. And just within the past few weeks doubts about the economy's foreseeable future have surfaced. All of these challenges are a big reason shares still remain well below their pre-pandemic peak.
But this is one of those rare cases in which a company is simply defying the apparent odds.
Take the management of its debt as an example. While it's still sitting on a little more than $25 billion in long-term liabilities, that's progress from 2022's peak of nearly $32 billion. Perhaps more important, Carnival has been able to pay down this debt using profits driven by surprisingly strong demand for cruises. Last quarter's revenue of $5.9 billion was record-breaking, capping off record-breaking revenue for the full year. EBITDA also reached record-breaking levels during the final three months of 2024, and better still, the company entered 2025 with record-breaking bookings for early 2026.
What gives? It may have something to do with the fact that while consumers may be increasingly cost-conscious, they're still willing to splurge on travel if the value is strong. And the value of leisure cruises is indeed strong. That's why AAA predicts 19 million Americans will take a cruise this year, up 4.5% from last year's count to yet another record.
That growth pace alone isn't enough to make Carnival stock an explosive winner. But this persistent growth paired with investors' realization of Carnival's business resiliency may be the catalyst needed to make up for this stock's undeserved lethargic performance going all the way back to 2020.
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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Starbucks and Uber Technologies. The Motley Fool recommends Carnival Corp. and Dutch Bros. The Motley Fool has a disclosure policy.
