Prediction: These 3 Stocks Will 10X in the Next 20 Years

Getting a 10x return on a stock is not something people should take lightly. But when you break it down, a tenfold return over two decades works out to about 12% per year. That sounds modest until you count how few companies compound at that pace for 20 years. The ones that do tend to share a trait: They are building something today that the market has not yet priced in, and it should pay off for years in a sustainable way.

Life Time Group Holdings (NYSE: LTH), First Watch Restaurant Group (NASDAQ: FWRG), and Freshpet (NASDAQ: FRPT) each run consumer businesses with long runways and potential turnarounds that could pay off over decades.

Image source: Getty Images.

1. Life Time is building bigger, not just more

Life Time runs 195 "athletic country clubs" across the U.S. and Canada, and it has decided that the next 20 years belong to bigger buildings, according to company leadership. The 2026 class of 14 new clubs will total about 1.3 million square feet, close to double the footprint of each of the past two years' classes. These are ground-up builds with pools, courts, and in-house clinics.

The more interesting shift is who walks in the door. Life Time has been cutting low-dues memberships paid for through medical insurance plans, and the members it keeps are paying higher dues and spending more on in-center services, personal training above all. Revenue per membership rose 11.8% in the second quarter even though the member count grew 1.2%. The company is prioritizing pricing power over headcount, a rare move for a gym chain.

I think this stock could 10x because it is doing something most gym chains never manage: raising what members pay while making the clubs harder to leave. A family that swims, plays pickleball, and books a trainer at one building is not shopping around for a cheaper membership. Stack that pricing power on top of 14 new clubs a year, each one bigger than the last, and the math over two decades starts to look reasonable. I also think fitness is a growing trend that will never go away.

These clubs are expensive to build, and Life Time pays for them with about $1.5 billion in debt plus sale-leaseback deals, in which it sells a building it owns and then rents it back for decades. That works well while members keep showing up. In a recession, the lease payments stay the same even if the parking lot thins out, and that is the part of the story I would watch closely.

2. First Watch owns a daypart nobody else wants

First Watch serves breakfast, brunch, and lunch, then closes in the afternoon. That sounds like a limitation, but it means no dinner labor, no late-night staffing, and one shift of managers. The chain has grown to 665 restaurants in 33 states and plans 60 to 62 net new openings this year, most of them company-owned.

First Watch has also spent the past three years buying out its own franchisees, picking up 64 restaurants and their development rights across eight deals since May 2023. The company calls this a core part of its growth strategy, meaning the brand controls more of its own map as it opens new units. If this strategy pays off, we could see some real long-term stock movement.

3. Freshpet is turning fridges into a moat

Freshpet sells refrigerated dog and cat food through branded fridges placed inside grocery, club, and pet stores. The fridge is the strategy: Once a retailer gives up floor space for one, the brand is hard to dislodge. The company's latest investor presentation shows its Ennis, Texas kitchen growing from five production lines to more than 10, which would take the whole network from 16 lines to at least 24.

I think Freshpet could 10x because it found a side door into one of the most crowded aisles in the grocery store. Pet food is a $57 billion category in the U.S. dominated by kibble and canned food, and Freshpet did not try to out-market the giants on their shelf. It brought its own shelf. Those branded fridges, now nearly 40,000 of them, give the brand a physical foothold that a new entrant cannot buy with an ad budget. A retailer that has already cleared floor space and run an electrical line is not eager to swap it out.

The second half of the bet is the kitchens. Freshpet makes its own food, and it is pouring about $150 million into new lines and bag technology this year, which it says will raise product quality and squeeze more output from each line. That is why management lifted its long-term adjusted gross margin target to at least 49%. The company still holds 4.3% of the dog food and treats market, which is the whole point: A brand with a fridge network and its own factories only needs a few more share points to become a far larger business. It also ended June with $351 million in cash and has started buying back stock, which is not something you see from a company that feels threatened.

What should investors do with this information?

None of these three needs a miracle to 10x, but we also need to be realistic about what could go wrong and keep these companies from achieving this goal. Each needs to keep doing what its own filings describe: Life Time opening large clubs, First Watch filling in the map, and Freshpet adding lines and fridges. The sensible move is to size positions small, since all three are volatile, and to check each quarter whether the plan is on track rather than whether the stock moved. Twenty years is a long time to be wrong, but it is also a long time to be right.

Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Life Time Group. The Motley Fool recommends Freshpet. The Motley Fool has a disclosure policy.