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2 actions in progress for monster return potential

Stock market volatility comes and goes, but the key to building wealth in the stock market is staying focused on growing a company. If you own shares of a growing company, you are almost certain to reap big returns over time.

Here are two stocks that are poised to deliver exceptional returns to patient investors.

1. Carnival

Carnival (NYSE: CCL) is the world’s largest cruise operator and strong demand trends continue to indicate a profitable investment opportunity. Carnival achieved record revenue, operating income, customer deposits and booking levels in Q2.

Despite the strong quarter, the stock was limited in 2024. While management sees unprecedented demand for 2025, the company’s debt burden is the main factor holding back the stock.

Carnival ended the last quarter with total debt of $29 billion, compared to $11 billion in 2019. The company spent $425 million in net interest expense in Q2, but reported net income of $92 million. dollars. By reducing debt and interest expenses, Carnival could significantly increase its profits and boost its stock price.

Fitch Ratings sees a positive outlook for Carnival’s debt reduction plans. The credit rating firm cited the company’s scale, high operating margins, strong liquidity and expectations for lower debt levels, which will lead to stronger credit ratings. Getting a better credit rating could boost investor sentiment and boost stock prices.

The company has already reduced its debt by $6 billion over the past two years. Ultimately, what helps Carnival pay down its debt is favorable demand trends in the cruise market. Cruises are gaining ground over other forms of travel, generating record revenues. Analysts expect Carnival’s revenue and earnings to grow 15% and 27% next year, respectively.

As Carnival cuts interest expenses and increases margins, the stock price could rise substantially in the coming years.

2. The Dutch Brothers

Investing in new emerging restaurant brands can be one of the most profitable strategies. Starbucks and Chipotle Mexican Grill have been the stars of the industry for the past few decades and Dutch Bros (NYSE: BROS) continues to show why he is next in line.

The company is constantly opening new stores, or “stores,” across the country. It opened 36 new stores in the second quarter, increasing revenue by 30% year over year. It ended the quarter with 912 locations in just 18 states.

Shares are trading 11% below their initial public offering (IPO) price in 2021, but this is a great buying opportunity. The company’s IPO just before high inflation caused poor traffic and inconsistent same-store sales. However, same-store sales rose 4% year-on-year in Q2 and have remained positive for six consecutive quarters.

Dutch Bros is in the process of rolling out mobile ordering at its locations, which should benefit same-store sales in the long term. A focus on fast order delivery by a warm and friendly staff will serve the company well as it expands into more states.

In the long term, Dutch Bros is targeting more than 4,000 stores. It has a long upside, but the stock trades at a very reasonable price-to-sales (P/S) ratio of 2.3. This is below the average restaurant stock value of 3.4 times trailing revenues. Investors should expect the stock to trade at the current P/S multiple, if not higher, over the long term, meaning the stock should follow the company’s earnings growth.

With 32 states left to expand into, Dutch Bros can maintain strong revenue growth for several years and deliver phenomenal returns to investors.

You should invest $1,000 in Carnival Corp. right now?

Before buying shares in Carnival Corp., consider the following:

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John Ballard has positions in Dutch Bros. The Motley Fool has positions in and recommends Chipotle Mexican Grill and Starbucks. The Motley Fool recommends Carnival Corp. and Dutch Bros. The Motley Fool has a disclosure policy.

2 Stocks on Track for Monster Return Potential was originally published by The Motley Fool

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