The following stocks have each experienced unprecedented levels of financial success over the last 4 years. These companies have endured the recession, recovery, volatility, and uncertainty but remain strong and not fazed by the market's confusion. Each of these companies are continuing to post impressive financial gains but the question is, how long will these companies maintain this level of growth? Below is a look at 15 companies that have created an identity over the last 4 years and have the potential to continue growing.
The chart below looks at 15 companies with extreme levels of growth and compares revenue and net income, in millions, over a period of 4 years. In addition I have added stock performance and measurables so that we can discuss how different stocks perform with similar fundamental performance and growth. All financial data was obtained using Google Finance.
|Ticker||2007 Revenue||2010 Revenue||2007 Income||2011 Income||Stock Performance Since Jan. 2007||Market Cap (billions)||P/E||Beta|
The 15 companies listed above have each performed exceptionally well over the last 4 years however stock performance is much different for each company. Below I have included a few areas that stuck out to me and my thoughts on the future for these companies.
Baidu.com (BIDU) is a Chinese internet search provider. The website resembles Google with several links such as Post It, which I compare to Yahoo (YHOO), a music page, and a mapping service. Baidu.com has expanded its services over the years and has posted incredible gains. The stock trades on high expectations with a P/E over 60 yet I believe it's appropriate. And if the company could potentially grow much larger with a massive audience in China. I would however be cautious since any sign of stalled growth could cause the stock to lose a large portion of value in a short period of time.
Celgene Corporation (CELG) is a biotechnology company that despite strong growth has only gained 5% over the last 4 years. I contribute the modest gains to its inconsistent profit margins. However, the stock has traded in a tight range since August 2009, but recently broke through the resistance and is now trading at 52-week highs. Most would agree that the recent success is a result of strong earnings and increased guidance and large share repurchase incentives. The stock has been quiet over the last few years but I believe it's now ready to reach new highs with strong earnings and no signs of delayed growth.
Ebix, Inc (EBIX) is one of the smaller companies on the list. It's a supplier of software and e-commerce to the insurance industry. The stock is trading with an exceptionally low price-to-earnings ratio considering its growth. The reason for its low P/E is an alleged violation that Ebix mislead and falsified statements and failed to disclose adverse facts about the business. As a result of this lawsuit Ebix has lost over 40% of its value. I don't know if the lawsuit will prove to be valid yet I do know the company has experienced a large amount of financial success, which includes higher profit margins each of the last 5 years and a solid balance sheet. For investors that are willing to wait for the lawsuit to run its course, this stock could have the potential to return incredible gains, as a share repurchase is likely and earnings don't appear to be slowing down.
Green Mountain Coffee Roasters (GMCR) is trading with a P/E over 100, which makes me nervous as an investor. I believe the stock has reached its limit and now presents more risks than potential rewards. It depends on the price of coffee, which is unreliable, and I believe that one bad quarter could result in this stock losing a large portion of its value.
Lululemon Athletica (LULU) and Chipolte Mexican Grill (CMG) are two companies that I view in a similar fashion. Both companies offer a product that is nowhere near its full potential, and with expectations to expand most believe that earnings will continue to rise. However, both stocks are expensive in comparison with earnings and investors may benefit by waiting for the stocks to fall before purchasing, but then again, it's very possible that both stocks will not drop but will climb. I believe both stocks are exceptional companies with great products, but I am still undecided on their direction.
Google (GOOG) has posted a gain of only 20% since January of 2007. I believe it's about to change as I find it likely that Google will break into new territory within the next year. The company is preparing to grow with two large acquisitions: Motorolla Mobility (MMI) and ZAGAT. MMI provides the company with patents and a handset manufacturer which gives Google more flexibility with the Android system. ZAGAT gives the company much needed reviews to expand its local search segment. The company has several areas of development and has made large strides over the last year to potentially reach record levels in the near future.
Trina Solar Limited (TSL) has lost 15% of its value over the last 4 years despite posting one of the largest margins of growth within the market. The loss is a result of the last 6 months with the stock losing 70%, including 15% on Tuesday. The stock has been hit hard as of late, and now trades with a P/E ratio of 2.13. I am bullish on TSL because 2010 was a record year for revenue. And 2011 is on pace to outperform the record performance in 2010. The only problem is the company's income, which dropped by 70%, last quarter, because of high costs. My views on TSL are very simple, if the company is increasing revenue then its customers are still growing. Costs will fluctuate and it should be expected, the company has operated efficiently and has decreased its debt-to-assets ratio each of the last 3 years. Therefore, the company is well equipped to handle a rough period such as this and although profit margins have decreased each of the last 2 quarters I believe the stock is trading at a very low price. With increased revenue I am confident that at some point in the future profit margins will begin to rise, as will the stock, and investors who take advantage could be heavily rewarded.
Research in Motion (RIMM) has had a good run and has been very successful over the last several years. If you look and compare the company's income statement and balance sheet over the last 4 years you would probably believe the stock would be trading with 500% gains rather than a 45% loss. It's a perfect example of the affects that expectations and future guidance can have on a stock. The company's growth is now slowing and its BlackBerry products have lost relevance in the smartphone and tablet industry. The stock is probably near the bottom of its trading range, however I believe it will remain at these levels for the next several years. I am optimistic of the company's future because it has no debt, a large number of patents, and enough cash to start over from scratch. And the company needs to start over. I believe the BlackBerry name is damaged goods and will no longer be successful. It has been surpassed by several other products within the industry, yet RIMM has the technology and every advantage to create something that is new, different, and exceptional that can compete with Apple (AAPL) and Google. But the company must realize this fact, and I wonder how long it may take, therefore I believe it will be a long time before this stock ever trades above $50.
Disclosure: I am long GOOG.
Disclaimer: As with any investment, due diligence is required. The opinions in this article are not intended to be used to make a particular investment or follow a particular strategy.