Think of companies like humans, they’re born, grow up, mature, and eventually age. This is the crux of the corporate lifecycle theory, which divides companies into distinct phases:
Young growth companies that are still finding their footing
Mature growth companies that have hit their stride
Mature stable companies that have become steady eddies
Here are three share ideas that are at different stages in the corporate lifecycle.
This article isn’t personal advice. If you’re not sure an investment is right for you, seek advice. Investments and any income from them will rise and fall in value, so you could get back less than you invest. Ratios also shouldn’t be looked at on their own.
Investing in an individual company isn’t right for everyone because if that company fails, you could lose your whole investment. If you cannot afford this, investing in a single company might not be right for you. You should make sure you understand the companies you’re investing in and their specific risks. You should also make sure any shares you own are part of a diversified portfolio.
DoorDash – Young Growth
DoorDash perfectly fits the description of a young growth company, marked by rapid expansion and dominance in the US food and convenience delivery space.
DoorDash operates as a digital platform connecting users with restaurants, grocery stores, and retail shops. Drivers, called Dashers, pick up and deliver orders, while DoorDash takes a cut from delivery fees and commissions.
The aim is to create a sticky, highly recurring business.
For DoorDash, this is an app users instinctively turn to whenever they’re hungry or need something delivered.
So far, it’s working.
After years of negative operating income due to heavy investment, DoorDash turned the corner in mid-2024 when operating profit flipped positive. Gross order value has grown for over 13 consecutive quarters. And over half of its monthly active users now subscribe to DashPass for reduced delivery fees and better discounts, boosting recurring revenue and brand loyalty.
Still, the road ahead is not all smooth.
Rivals like Uber Eats, Amazon, Grubhub, and local players make user retention tough in a market with low switching costs. Even a small price advantage or better promotion can quickly shift customer loyalty.
Winning in this space often requires rapid category and global expansion.
DoorDash is reinvesting its earnings to strengthen its position by buying companies like Deliveroo, expanding into new service verticals, and optimising its ad platform. Its free cash flow supports these efforts.
Young and rapidly expanding companies like DoorDash offer a high risk reward trade-off.
We see plenty of potential to continue driving earnings growth, and the valuation, while lofty, doesn’t look overly stretched. However, there is additional risk on the execution side, and investors should prepare for greater than average volatility.
Meta – Mature Growth
Meta evolved from its early Facebook origins into a sophisticated digital advertising giant.
After years of figuring out how to monetise its massive user base, Meta has built an advertising machine that generates hundreds of billions in annual revenue, while maintaining healthy profit margins.
The company also generates enormous free cash flows, which it strategically splits between returning cash to shareholders through buybacks and investing heavily in future growth opportunities.
Meta's strategic investments clearly demonstrate a mature growth mindset. The company isn't just looking to maintain its cash-rich apps – it's aggressively betting on the future through AI, virtual reality, and wearables to position itself at the forefront of major technology shifts.
While these emerging areas hold great promise, they also come with considerable uncertainty as they carry execution risk and uncertain return timelines.
The defensive nature of Meta’s business is also something to highlight.
Its network effect (the value increases as more people join), massive data troves for AI-powered advertising targeting, and established relationships with advertisers create barriers that are extremely difficult for competitors to overcome.
These moats provide the stability that separates mature growth companies from younger peers.
For investors, mature growth companies like Meta can offer a compelling value proposition. They combine the best aspects of growth and stability with the potential for long-term capital appreciation by giving portfolios exposure to transformative trends.
However, it's important to recognise that even mature growth firms aren’t without risk. Their continued success often depends on their ability to execute ambitious initiatives and successfully navigate market dynamics, which are never guaranteed.
Coca-Cola – Stable Mature
Coca-Cola is arguably the epitome of a mature stable company – it’s been serving up refreshing fizzy drinks for over 138 years. In that time, Coca-Cola has expanded its portfolio of brands to around 200, which are served more than 2.2 billion times a day.
Performance in recent years has been impressive, with revenue growth holding up better than the broader beverage market. Coca-Cola’s success is partly due to its operating model, which differs from most competitors.
Rather than investing in big manufacturing plants, Coca-Cola partners with, and holds stakes in, local bottling companies. That helps keep a lid on costs and supports its industry-leading gross margins, which hover around the 60% mark.
It’s also helped operating profits to grow steadily and feeds down into healthy free cash flows. Without the costly burden of maintaining bottling facilities, Coca-Cola’s able to pour more of its cash flows into marketing efforts – creating a positive flywheel effect.
As you would expect from a mature company, there’s still plenty of cash left over to support share buybacks and a forward dividend yield of around 3.0% – although, no shareholder returns are guaranteed.
Keep in mind that there’s an ongoing dispute with US tax authorities, with a potential multi-billion-dollar payment on the line. The balance sheet is strong enough to absorb any negative outcome should it occur, but it would likely weigh on the group’s ability to buy new brands.
With one of the strongest brands in the world, Coca-Cola stands out. Mature stable companies like Coco-Cola can add a bit of stability to a portfolio. But remember, nothing is immune to ups and downs, especially in the short term.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Past performance is not a guide to the future. Investments rise and fall in value so investors could make a loss. Yields are variable and not guaranteed.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.
