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There are many investment strategies that, if you are patient, can be profitable for years to come. Some of these are relatively safe, such as investments in well-settled dividend stocks, while others may be more volatile but can potentially generate much larger gains.
If it interests you, read on to find out why. MasterCard (NYSE: MA), Carvana (NYSE: CVNA), and Okta (NASDAQ: OKTA) are the top three growth stocks that investors should watch for.
Source of the image: Getty Images.
Taking advantage of the war against money
Nicholas Rossolillo (MasterCard): Even with trade wars and fears of a slowdown in the global economy making headlines, turning into a world without money is alive and well. This is a boon for payment processing companies, and Mastercard is one of the best.
True, the company is already massive, with a market capitalization of over $ 270 billion and a $ 15.7 billion business turnover over 12 months. This does not mean that it is not a problem of high growth. In the first six months of 2019, revenues increased by 10% and earnings per share by 31%. This is due to the high profit margins of Mastercard (the operating margin was nearly 58%), strict control of expenses and a generous stock repurchase program which gives an additional boost to the net result.
In addition to its central payment system, Mastercard continues to strengthen its position by adding ancillary services, such as cross-border payment systems and data security, to its customers. Some of these systems are developed locally, while others have been added via an acquisition, such as his Transfast purchase in early 2019. Revenues out of his bread and butter payment processing segment have increased 23% compared to the previous year. second district.
Mastercard is currently valued at 30 times the expected profits over one year, an exorbitant price given that S & P 500 carries a forecast price / earnings ratio over one year of 17.7. However, given the pace of continued expansion of Mastercard and the even faster conversion of revenue into profitability, this is not an extravagant bonus to pay. While Wall Street is overwhelmed by the announcement of the imminent economic catastrophe, the Mastercard action looks like a rock-solid buy.
A growth story that is gaining ground
Daniel Miller (Carvana): Carvana, a fast-growing used car dealer, is a fast-growing stock pulling full steam and Wall Street has taken note of it. The stock has more than doubled in 2019, up almost 480% since my article mentioning it as a title you can not afford to miss, and nearly 600% since it was released to the public two years ago . Let's review some of its impressive growth indicators, as well as the risks associated with holding the title.
Looking at Carvana's second-quarter earnings on August 7, you can understand why investors are joining us. Carvana recorded a three-digit growth in revenue for the 22nd consecutive quarter, driven by a 95% increase in retail units. Carvana entered 28 new markets, built two ATMs and even posted a sharp increase in gross profit per unit (GPU) to $ 3,175 – an impressive leap that exceeded its target of $ 3,000.
The growth story of Carvana is still in its infancy. The second-hand car retailer is poised to continue to grow its units and revenue, its annual GPU and to reduce its advertising as a percentage of revenue over time. Other factors are expected to improve the company's financial performance, including Carvana's new trend of buying more vehicles from consumers than before – vehicles purchased from consumers and then sold at retail are more profitable than auctioned vehicles and sold at retail. Another trend that favors the company is simply time spent in the markets: Carvana's older markets continue to reduce customer acquisition costs while increasing market penetration. Carvana has a long list of new markets that have only scratched their surface.
The story of Carvana's growth has one drawback: it is expensive to expand so quickly. Management has developed secondary offerings and has leveraged debt to fund growth, which is far from profitability. The risk is that Carvana will not achieve profitability fast enough for investors and the share price will suffer. For the moment, investors are delighted with the growth of its turnover and its market, which is enough to make it a security to buy right now – if you can bear the risk of losing it. strong growth in the automotive sector.
The emerging player of the identity as a service
Chris Neiger (OKTA): Okta is not a well-known name, but this cloud-based software security company is quickly becoming a major player in the identity market as a service.
Companies rely on Okta to protect access to their data. The Okta software works as an access controller to allow online users (such as customers or employees) to access certain information while limiting access to confidential information. This market has become increasingly important as more and more companies set up online services for their customers and employees. It is also fast becoming a major market valued at $ 24 billion over the next six years.
Okta is not only helping to create this new market; it's growing so fast with that. At the end of the last quarter, Okta had more than 6,500 companies using its service and its total turnover increased by 50% over the previous year. In addition, Okta has been able to attract larger customers. Customers with an annual contract value greater than $ 100,000 increased by 53% over the same quarter of the previous year.
Investors looking for a fast-growing stock that is just getting started on this important technology market should seriously look into Okta right now.
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