The following companies are on pace to record full year earnings that easily surpass 2010. These companies each provide a service or product that is both growing and expected to grow in use. At current prices I believe the stocks of these companies have the potential to possibly double within the next 12 months. Below is a look at each company and its fundamentals, products and reasons that I believe the future performance will be so great.
Travelzoo Inc. (TZOO) is a global media company. The company informs more than 22 million subscribers of the best travel, entertainment and local deals from thousands of companies. Travelzoo is growing at a rapid rate and until recently traded with a high level of optimism. The company's stock has now lost more than 55% of its value since July 20, the date before earnings, as investors believed the earnings were a disappointment. I however do not view the company's recent earnings report as a disappointment but rather an opportunity for investors to take advantage.
The above chart illustrates Travelzoo's last five earnings reports. The last two quarters have significantly outperformed year over year results by a significant margin. In January when the company announced first quarter earnings the stock jumped to a price over $100 on the news of increased revenue and accelerated growth. The stock has now dropped to a price of $38.01, a loss of more than 60% from its 52 week high. If you look at the chart you would see revenue, profit margin and net income that significantly increased over any quarter that is listed.
During the second quarter the company announced revenue of $37.6 million, a gain of 34% year-over-year along with net income of $4.9 million, a gain of 50% year-over-year. The additional growth was experienced in both domestic operations, a gain of 25%, and foreign operations, a gain of 67%. In addition the company announced it added 800,000 subscribers during the quarter which was a larger gain versus the same period in 2010.
The company's balance sheet over the last five years have been solid as well. The company has increased its assets over the last three years and is on pace to post assets substantially higher versus 2010. Travelzoo continues to operate at a high level without accumulating debt which is illustrated on the above chart.
Despite market reaction I believe Travelzoo's earning report was positive and speaks volume of the company's growth. The company is growing at a rapid rate and is constantly expanding into new markets. During the second quarter Travelzoo expanded into 27 markets which means that Travelzoo was creating one market every three days. For a company with only $13 million in net income during 2010 I find this growth to be utterly amazing.
The fact that Travelzoo was able to open new offices, hire and train employees, expand into new markets throughout the globe, and post net income gains of 50% year over year should demonstrate the speed and efficiency at which this company is growing. In addition to growing, the company has expanded into new markets such as Asia and Australia. This level of expansion costs money and takes time to properly develop. I believe that Travelzoo has not experienced anywhere close to its full effect of these markets. Now that the markets have been created the company can now expand and profit in a much greater way. I expect Travelzoo to double in price over the next 12 months, potentially triple, as new markets continue to grow and expand. I believe that Travelzoo has the correct business plan in mind, to grow the company throughout the globe, focusing on the most popular areas for travel. In addition to revenue growth I expect margins to increase now that global markets have been developed and services are in place. The strategic locations of this company will allow it to grow with limited amounts of real estate or additional employees neede,d which should cut down on long term cost.
IPG Photonics (IPGP) is a provider of high power fiber lasers and fiber amplifiers. IPGP is one of few in the competitive semiconductor industry that could double its price with unbelievable growth. The company has raised its guidance and surpassed its guidance each of the last five quarters.
The chart above shows full year earnings since 2006 with 2010 posting record gains. In 2010 the company earned $54 million with $300 million in revenue. This year is on pace to surpass 2010 by a significant margin with record earnings. During the first two quarters the company posted revenue of $222 million and has nearly matched 2010 income with $53.8 million. The company announced second quarter earnings on August 2 with income of $30.74 million and revenue of $122 million, a gain of 81% year-over-year. IPGP has given third quarter guidance with revenue between $120-$130 million along with earnings between $0.56-$0.68 per share. The upcoming third quarter is most likely to exceed guidance as the company has outperformed each of the last five quarters. Company performance is charted below by Reuters.
|Last Five Estimates|
Despite record earnings the company is trading down over 20% since July 5. With no key developments from the company, other than expected growth, investors must assume the loss was a result of the market sell off. During the last three days the company has posted gains of more than 12% with the stock trading at $58.11. I believe these gains are the result of a market that is beginning to gain some confidence, causing this undervalued stock to see gains. The stock trades with a price to earnings near 30 and with strong growth I believe the P/E is modest. With strong growth that continues to outperform, increased guidance, and a market that continues to build confidence I believe that this stock has the potential to double over the next year.
3D Systems Corporation (DDD) designs, develops and manufacturers products that are capable of using three dimensional electronic models from a computer, and then utilizing the data from the models can create an actual object. The company has experienced a great deal of growth over the last year as its technology has become more popular. The technology itself has been around for quite some time but I would argue that the technology of 3D printing is not far from entering the household of consumers throughout the globe. I believe this technology has the potential to be transcendent if the products can become more consumer friendly in the future.
The products that DDD manufacturers, designs and sells are traditionally low volume machines that benefit engineers or those who work in similar fields. I personally believe this technology could be used for the average consumer as the products have improved over recent years. The machines have been somewhat limited as to what can be produced because of the materials that are used. Over the last two years the company has expanded its product line by acquiring multiple companies that contribute to the technology. As a result, the company now offers a variety of 3D printing devices that offer services for personal, professional or manufacturing use. The company has created various products that appeal to new customers and has experienced exceptional growth during the last year.
The chart above shows key points on the income statement of DDD over the last five quarters. With the exception of Q1, which significantly outperformed year over year earnings, each quarter posted higher net income and profit margins. The growth has been consistent as the company continues to post year-over-year gains in nearly every category. The most recent earnings report, which is charted above, posted revenue of $55.13 million compared to $35.14 million year-over-year. The company also earned additional EPS of $0.26 compared to $0.06 year-over-year. The company's large gains are impressive but I believe the increased profit margins speak highest of the company's progress as it has managed to keep expenses low despite accelerated growth.
3D Systems has posted additional gains in assets quarter-over-quarter. The large gains, which nearly doubled during Q2, are a result of the various companies that DDD has acquired over the last year. What's even more impressive is that the company has managed to lower its debt each quarter despite the cost of acquiring new companies. I believe the chart reflects the company's business plan to grow through acquisitions and benefit from stronger demand.
The company has posted solid earnings, increased assets, and is growing at a rapid rate. The stock has lost 13% of its value over the last month and has now gained more than 14% during the last three days. I believe this stock will continue to rise as the usage of its products become more common in households throughout the world. I do not believe the company has come close to its potential and with little competition the market is open for 3D Systems to control.
I expect for 3D Systems to continue acquiring companies that could assist in future growth or development. The company has been fairly quiet as of late and I wander if it preparing for a large purchase of a company such as Stratasys (SSYS). Stratasys is another company that is similar to 3D Systems with a slightly different technology. I believe that both of these companies are solid and will experience long term sustainable growth as the industry continues to expand. I believe it is possible that DDD may purchase SSYS which could propel both companies to new levels of growth with each having different areas of strength. 3D Systems has proven that it will buy the competition and utilize it for growth. I believe that SSYS could offer 3D System growth and expansion in a way that no other acquisition has offered because of a shared but different market. If this acquisition were to take place I believe both companies could potentially triple but without a large acquisition such as SSYS I believe that 3D Systems will continue to grow, increase margins, and double in stock price over the next year.
BroadSoft Inc. (BSFT) is a global provider of software that enables providers to deliver voice and multimedia services over Internet networks. The company offers service in 65 countries and six continents with sales driven by North American service providers. The company has performed high above expectations during the last five quarters because of its growing market.
|Last Five Estimates|
The chart, from Reuters, show estimates for the company during the last five quarters. The company has exceeded expectations each of the last five quarters by a large margin. What makes this so impressive is that the company consistently increases its guidance yet still outperforms the expectations.
BroadSoft's revenue, net income and profit margins are compared over a period on the five earnings reports. During the most recent earning report the company announced revenue of $32.18 million, a gain of 63% year-over-year along with net income of $15.79 compared to negative $1.77 million in 2010. This demonstrates the company's growth in revenue along with its ability to control costs to record higher profits.
BroadSoft has yet again increased guidance for the upcoming quarter along with full-year 2011 earnings. The company's growth is directly related to the growing number of mobile phone users along with the popularity and increased usage of cloud based services. The company focuses on both areas as a primary contributor of income. The company is strategically located throughout emerging markets where the services are growing at an incredible rate. I expect for the company to exceed its guidance for both the third quarter and full year results based on its history of outperforming its own expectations. I also expect to see long term growth from the company as the services are being used by more people in various countries every day. With the stock trading at nearly half of its 52 week high I see no reason as to why this company could not easily double its stock price over the next 12 months as it continues to produce high earnings.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in TZOO, BSFT, IPGP, DDD over the next 72 hours.