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These 3 stocks have doubled and still have room to grow

The stock market bottomed out in March 2020, and the speed of the stock market recovery since then has been dizzying. In fact, it’s hard to find stocks that do not have doubled in the past year.

Therefore, for this article, I am not looking for stocks that have doubled in the last year alone. I look at stocks that have doubled from what they were in the months leading up to last year’s stock market crash. The three stocks I’m highlighting today have all found ways to adapt and grow during the pandemic. And I believe they can still grow significantly from here.

Image source: iRobot.

1.iRobot

From 2017 to 2019, the shares of i robot (NASDAQ:IRBT) went up and down, but mostly stayed within a fixed range. And during the stock market crash of 2020, the stock crashed and approached its IPO price of 2005 – ouch. For years, the market has questioned the company’s competitive advantage in self-contained vacuums. And during the pandemic, investors wondered if its high-end products could thrive in a recession.

iRobot has proven doubters wrong over the past year, ultimately propelling the title to market leadership. Despite its strong presence in brick-and-mortar retail, the company’s sales in 2020 were up 18% from 2019. This growth was aided by soaring direct-to-consumer (DTC) sales — fourth quarter 2020 DTC sales increased 117% year over year to $68 million. This is important because iRobot’s approach to differentiation involves developing a direct relationship with its customers.

iRobot builds DTC relationships through e-commerce sales, which it hopes will account for 20% of total revenue by 2023. Plus, its new operating software offers greater customization of the robot and requires an iRobot app account, bringing the business even closer to the end customer. . And iRobot hopes to leverage these consumer relationships into various recurring revenue streams in the future. For just one example, it is currently testing a robot-as-a-service (RaaS) offering in select markets.

For iRobot, he hopes recurring revenue from sources like RaaS will provide predictable, high-margin revenue down the line, which I believe can create fuel for above-market stock returns. But make no mistake: the company is already highly profitable with earnings per share of $5.14 in 2020, making it a share value in today’s market.

A young woman makes a happy face looking at her smartphone.

Image source: Getty Images.

2.Snap

Break (NYSE:SNAP) has the popular Snapchat messaging app. When he held his Initial Public Offering in early 2017, I refused to touch it with a 30ft pole. Revenue growth was superb, nearly sevenfold from 2015 to 2016. But the company’s losses were staggering at nearly $515 million, which exceeded revenue at the time. Also, Snap didn’t have a clear plan to become profitable and was simply trying to sell the market on the idea that it was a camera company and not an app, although it only launched its Spectacles camera a few months before the IPO.

Simply put, Snap’s management didn’t seem to prioritize creating shareholder value. And indeed, from 2017 to 2020, the company averaged an annual net loss of about $1.7 billion. Seeing numbers like these made me feel validated in my aversion to a Snap investment.

As investors, however, we have to gladly accept when a story has changed. And I think Snap’s story is entering a new chapter. In 2020, the company recorded positive earnings before interest, taxes, depreciation and amortization (EBITDA) for the first time for a full year. Granted, EBITDA is the lowest bar for earnings – I like net income by generally accepted accounting principles (GAAP) Where free movement of capital better. But Snap hit its 2020 goal of positive EBITDA and it believes it’s the first stepping stone to better earnings.

Snap’s revenue growth has accelerated for two consecutive years, from 42% year-over-year growth in 2018 to 46% growth in 2020. For the first quarter of 2021, this is to guide a further acceleration to nearly 60% annual growth and to maintain a Revenue Growth Rate of 50% or more for “multiple years”. Just for perspective, sustaining 50% growth would result in annual revenues of over $10 billion in less than four years.

This meteoric revenue growth will take advantage of the advertising platform that Snap has already built, which means much better profits could finally be within reach. With compound growth like this, the business could look very different in a very short time, which makes me seriously consider Snap as an investment today.

A scale weighs a bag of money against an hourglass.

Image source: Getty Images.

3. Zebra Technologies

Finally, Zebra Technologies (NASDAQ: ZBRA) is a quiet overachiever. The company takes its name from its barcode printers and scanners, which help businesses manage inventory. Net sales fell less than 1% in 2020 as the COVID-19 pandemic slowed economic activity early in the year. But the things rebounded in the fourth quarter, with fourth-quarter sales growing nearly 10% year-over-year to drive record quarterly sales.

Of course, Zebra’s services extend far beyond scanning a barcode at checkout. Almost anything can get a barcode for scanning, from hospital patients to football players. Hospitals are using technology to track patients and certain vital signs in real time, while the National Football League likes to display player data in different ways to its audience. Also, over time, it seems reasonable that supply chains will get smarter and smarter. And it’s hard to imagine that happening without Zebra being a valuable part of the equation.

For 2021, Zebra expects revenue growth of 10% to 14%, most of which will be organic. You may be able to find faster growth elsewhere, but consider its free cash flow (FCF) generation. The company converted 20% of its turnover into FCF in 2020, which represents exceptional profitability. Plus, the valuation is compelling here at less than six times the sales.

In other words, Zebra has strong operating metrics that more than offset its modest growth. And the share price is reasonable enough to reward long-term shareholders.

IRBT chart

Returns since October 17, 2019. IRBT given by Y-Charts

3 actions, 3 levels of risk

Of these three actions, I prefer iRobot today. I like his current business and think his pivot to a more recurring revenue model is a great move. However, if Snap grows as its projections go and makes decisions to prioritize profitability, then it could have a much higher cap than iRobot over the next three to five years. That said, I’m still personally on the fence about whether this is a buy or if the management needs to show more improvements first. Finally, for its part, Zebra may have the most modest upside potential, but its strong FCF generation and reasonable valuation give it the lowest downside risk, in my view.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.