2 No-Brainer Growth Stocks to Buy Right Now

Holding shares of growing companies is one of the most efficient ways to build wealth over time. The key is to maintain a long-term mindset, ignore short-term volatility in the stock market, and concentrate on investing in companies that possess a competitive edge.

Here are two growth stocks that would make solid investments right now.

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1. Reddit

Reddit (NYSE: RDDT) has quickly become one of the top three most visited sites in the U.S., turning the conversation-driven social media platform into a magnet for advertisers. Its momentum also illustrates a significant competitive advantage for Reddit, as people seek authentic, human-created content in an increasingly artificial intelligence (AI)-driven world.

Reddit has become a popular platform for discussing a wide range of topics. The company has released numerous enhancements, including AI features, to make it easier to discover new content and help publishers and advertisers gain more visibility in front of a large user base. Reddit saw its daily active users surge 19% year over year in the third quarter, reaching 116 million.

The stock sold off earlier this year as investors wondered whether AI models like ChatGPT would divert users and pressure Reddit's growth. But it's looking more like the opposite. Reddit appears to be benefiting from AI features, such as AI-powered language translation, which is fueling its international growth. Higher user engagement is driving growth in ad spending, resulting in a 68% year-over-year increase in Reddit's revenue to $585 million last quarter.

Perhaps the best reason to consider investing in Reddit is that it is proving it can scale the business profitably. Reddit reported a net profit of $163 million last quarter. On a trailing-12-month basis, Reddit generated $509 million in free cash flow, representing a 387% year-over-year increase.

Analysts project that free cash flow will grow at a 62% annualized rate to reach $2.4 billion by 2029. At a minimum, this growth should double the share price in the next five years.

2. MercadoLibre

MercadoLibre (NASDAQ: MELI) is the leading e-commerce company in Latin America, with a long runway of growth ahead of it. It had over 110 million unique buyers on its e-commerce marketplace last year, generating $56 billion in quarterly gross merchandise volume. Its leading e-commerce platform and fintech business has a significant opportunity to serve a large underbanked population across Latin America.

MercadoLibre's e-commerce marketplace feeds off the growth of its fintech services. For example, the payment methods it offers through the Mercado Pago fintech business accounts for approximately a quarter of the transactions in its marketplace.

The company leverages its extensive customer data to evaluate credit risk, driving significant growth in new products, such as credit cards. In Brazil, it issued 1.3 million new cards to customers last quarter, indicating rapid adoption. Its credit portfolio grew 83% year over year to $11 billion last quarter.

MercadoLibre has multiple avenues for business growth. Revenue increased 39% year over year in the last quarter. This marked the 30th consecutive quarter of 30% or more growth. It is rare to find businesses that have been operating for over two decades and have maintained this level of growth.

The stock's valuation looks attractive. The shares are trading at a price-to-sales (P/S) ratio of 3.8. This is toward the low end of its 10-year range, where it traded between a P/S multiple of 3.6 and 25.9. With analysts expecting revenue to grow at an annualized rate of 24% through 2029, investors can expect the stock to at least double in value in the next five years.

John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends MercadoLibre. The Motley Fool recommends Reddit. The Motley Fool has a disclosure policy.