Lots of stocks could double your money, but if they're only growing at, say, 3% per year, it might take about 23 years. Most of us would much rather double our money faster.
Here, then. are three intriguing growth stocks that appear to have rosy futures ahead of them.
Impinj (NASDAQ: PI) is a stock I've had on my watch list for several months, and while I've been waiting for its shares to retract a bit to offer me a better entry price, they have instead risen some 38%. The company specializes in the Internet of Things and makes radio-frequency identification (RFID) products. RFID technology allows for inexpensive tags that can be attached to a wide variety of items, enabling them to be tracked and to transmit information.
A common use these days is when retailers attach RFID tags to their wares, helping them keep track of inventory and better manage their supply chains. Airlines are customers, too, as RFID tags on luggage can help track it and reduce baggage losses. Many view Impinj as just getting started, seeing wider uses for its technology.
Impinj's revenue dropped some 9% from 2019 to 2020, in large part due to the pandemic, which depressed a lot of retail business — and travel as well. But we appear to be starting to put the pandemic behind us, and if that proves to be true, business is likely to keep growing briskly for Impinj, at least in the near term.
You can make a convincing case that the stock is overpriced, with its recent price-to-sales ratio topping 9 and the company still posting losses. But with a market capitalization recently only at $1.3 billion, the company appears to have a lot of room to grow, and long-term investors stand a good chance of seeing their stake double in value.
With a market capitalization recently below $2 billion, Infinera (NASDAQ: INFN) is another smallish company with great potential. It specializes in optical technology, some of which can, for example, help carriers boost their bandwidth without having to lay any additional fiber. The year 2020 was challenging for most companies, and Infinera was no exception, but it still managed to post a year-over-year revenue gain of 3% while boosting its operating profit margin, reducing its inventory levels, and increasing its cash flow.
Infinera is not the biggest player in its arena; that title would be more apt for Ciena, which is about four times bigger, or Chinese concern Huawei. Its smaller size is a plus, though, because many companies don't want to put all their eggs in one basket by relying on just one provider, so plenty will look to do business with Infinera.
The company sees increased demand for bandwidth as a growth driver, along with geopolitical developments, as many countries' issues with China are leading them to bypass Huawei and focus on Ciena and Infinera. In a February conference call, CEO David Heard noted that the company is making progress in its goal to achieve vertical integration: “We remain focused on our investments in vertical integration, a scarce and highly differentiated capability in the industry. As we look back to the full-year results for 2020, it's clear that the heavy lifting over the past two years to drive operational improvements is taking hold, as evidenced in our results.”
Cloudera (NYSE: CLDR) is a specialist in big data, helping its clients manage and analyze their data via cloud-based and customer-premises-based platforms. This hybrid approach arguably offers customers the best of both worlds, and it has some big customers, such as Telecom Italia, ExxonMobil, and Daimler. Many investors have been very enthusiastic about the cloud-data specialist Snowflake, for example, bidding its stock price up to a recent price-to-sales ratio of 57. But Cloudera offers hybrid data management solutions — at a recent price-to-sales ratio of just 4.4. (Cloudera hasn't been growing quite as rapidly as Snowflake has, though.)
Management expects most of its customers to be adopting its new cloud services and sees innovations in areas such as machine learning (ML) and artificial intelligence (AI) driving growth. CEO Rob Bearden noted in a conference call that:
We're dedicating more than 65% of our R&D dollars to public cloud services and hybrid cloud product development. That success, we see big opportunities in streaming ML and Applied AI. And together, these are our fastest-growing businesses, and we intend to enhance our differentiation in each of these areas throughout fiscal '22.
These companies all have terrific growth potential. None is a screaming bargain at current levels, but if they execute their plans and adapt nimbly to our ever-changing economy and technologies, they're well positioned to reward their long-term shareholders. If you dig deeper into one or more and like it but are nervous about its price, consider investing in it gradually over time. Or seek out some other compelling growth stocks — there are plenty out there. (Those who are more risk averse might just focus on steady dividend-paying stocks; those can deliver over the long run, too.)
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Selena Maranjian has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Snowflake Inc. The Motley Fool recommends Impinj and Infinera. The Motley Fool has a disclosure policy.