Investing in Growth Stocks with Strong Momentum
If you’re considering a $1,000 investment in growth stocks, it’s worth looking into companies that have a strong flywheel effect, which can drive consistent growth. A business flywheel refers to self-reinforcing cycles that help a company gain momentum over time, encouraging significant investments as they grow.
Two companies currently benefiting from this momentum are MercadoLibre and Toast. Fortunately for potential investors, both stocks are priced reasonably at the moment.
1. MercadoLibre
As of now, MercadoLibre’s stock is down 34% from its peak, yet its growth engine is still in motion. In Q4 2025, the company reported a 45% year-over-year revenue increase, marking the 28th consecutive quarter of at least 30% sales growth.
Oper ating across various sectors such as e-commerce and financial technology in Latin America, MercadoLibre’s business model supports and boosts each area. The growth in fintech users has been remarkable, with a 27% rise in monthly active users, reaching a total of 78 million. This surge greatly benefits e-commerce, as the company’s dollar volume of transactions in Q4 rose by 37%, fueled by more active buyers.
While MercadoLibre shows strong momentum, investor sentiment seems lukewarm. The stock trades at its lowest valuation since the Great Recession, which I find could be a great opportunity for value hunters.
2. Toast
In defense of its critics, MercadoLibre has been offering more free shipping to increase user adoption, which may squeeze profit margins. Those concerned about margin pressures might want to consider Toast, a company in the restaurant technology space, which seems set for profit growth.
Toast does sell payment processing technology at a loss to attract new customers, meaning profits may take an initial hit as the company expands. Though it processes payments, market competition keeps those margins tight. However, Toast also provides subscription software solutions for restaurants, which had a gross margin of 70% in 2025, contributing significantly to its revenue.
For markets where Toast has established a strong presence, bringing in new customers becomes easier due to brand recognition. This creates a beneficial cycle; while customer acquisition might initially hurt profits, long-term retention of those customers can turn into a growing revenue stream.
Toast’s management is optimistic that annual recurring revenue (ARR) could eventually hit $10 billion, which would likely lead to substantial profits. Given that its stock has dropped nearly 50% from its peak and currently trades at 2.5 times sales, I see it as a solid growth stock to consider right now.
Ultimately, both MercadoLibre and Toast offer attractive prospects for growth, supported by their respective flywheels. That’s what makes them both appealing today for investors.
