Updated: Feb 17
Recently I did an analysis of top 15 most undervalued stocks of 2020 here: https://www.wininstocks.com/post/top-15-most-undervalued-stocks-of-2020-based-on-peg-score-analysis
In this post we will take a look at 12 stocks of the fastest growing companies in terms of sales. While, as they say, past performance is not an indicator of future performance we will also look at:
their financial performance to see if they are in healthy shape
analysts ratings to see whether they rate these stocks as a buy
analysts target price and its difference vs. current stock price.
Hopefully, this will give us an indicator of whether these stocks will continue their stellar growth. When picking the stocks I looked at both the sales growth over the past 5 years and in the past year to make sure the stock is still growing. More recent growth, in my mind, is more important.
Here is the the list. Below we will look into each company in more detail.
Karyopharm Therapeutics (NAS: KPTI)
Last Year Sales Growth: 5401%
Past 5 Years Sales Growth: 9100%
Karyopharm Therapeutics, Inc. is an oncology-focused pharmaceutical company dedicated to the discovery, development, and commercialization of novel first-in-class drugs directed against nuclear export and related targets for the treatment of cancer and other major diseases. Its SINE compounds function by binding with and inhibiting the nuclear export protein XPO1 (or CRM1). Karyopharm's lead compound, XPOVIOTM (selinexor), received accelerated approval from the FDA in combination with dexamethasone as a treatment for patients with heavily pretreated multiple myeloma. A Marketing Authorization Application for selinexor is also currently under review by the European Medicines Agency (EMA). In addition to single-agent and combination activity against a variety of human cancers, SINE compounds have also shown biological activity in models of neurodegeneration, inflammation, autoimmune disease, certain viruses and wound-healing. Karyopharm has several investigational programs in clinical or preclinical development. The company was founded by Joseph Araujo, Ronald A. DePinho, Pamela A Silver, Giulio Draetta, Michael G. Kauffman and Sharon Shacham on December 22, 2008 and is headquartered in Newton, MA.
Karyopharm Therapeutics (KPTI) grown sales from $250K to $30.34M from 2015 to 2018. In the past 2 quarters, its sales were also growing well. Stock price for KPTI was at $20 in the middle of 2018; however, at the end of 2019 it dropped to just $4.20 as the company sales declined from 2018 sales. However, as the company picked up in sales in the latest 2 quarters, the stock rebounded and currently stands at 17.27. The company has yet to see a profitable quarter; however, with increasing sales its loss is declining. With continued growth in sales it will see profit in the next few years.
Mean rating from 8 analysts covering the company is 4.6, meaning Buy. The target price premium over the current price for KPTI is 48%. The company has little debt; no issues on this front. As for the Price-to-Sales ratio, it is quite high at 47. Ratios between 1 and 2 are generally considered good, and ratios less than 1 are considered excellent. Biotechnology category average P/S ratio is between 5.5 to 6.9. So, KPTI is overvalued even for its own category. However, investors are likely taking into consideration quick KPTI growth and expectations of future profit. With that, they are ready to pay premium for the stock.
Cronos Group Inc. (NAS: CRON)
Last Year Sales Growth: 238%
Past 5 Years Sales Growth: 15350%
Cronos Group, Inc. engages in the production and sale of cannabis in federally legal jurisdictions, including Canada and Germany. Its portfolio includes Peace Naturals, Original BC (OGBC) and Whistler Medical Marijuana Company (WMMC). The company was founded by Lorne Michael Gertner and Paul Rosen on August 21, 2012 and is headquartered in Toronto, Canada.
Cronos Group (CRON) is suffering from the same issue as most of other cannabis growers/distributors in Canada: for all of them the COGS (Cost of Goods) is too high. With that, they cannot have their Gross Income consistently in the positive. With that, chances of profit are also not high.
With CRON the situation is exactly the same. As you can see over the past 5 quarters they had 2 quarters with positive Gross Income and in 3 quarters they had positive EPS (one quarter they got away with negative Gross Profit and got positive EPS because of unexpected gain. With that, enthusiasm for CRON has reduced in the past year as you can see on the stock chart. However, the sales of the company are growing quickly. If the company manages to find a way to reduce COGS it will become a super-profit company very quickly.
Mean rating from 15 analysts covering the company is 3.7, meaning Overweight. The target price premium over the current price for CRON is 35%.
The company has little debt; no issues on this front. As for the Price-to-Sales ratio, it is quite high at 68.8. Ratios between 1 and 2 are generally considered good, and ratios less than 1 are considered excellent.
REGENXBIO Inc. (NAS: RGNX)
Last Year Sales Growth: 177%
Past 5 Years Sales Growth: 746%
REGENXBIO, Inc. is a biotechnology company, which engages in the development, commercialization, and licensing of recombinant adeno-associated virus gene therapy. The company was founded by Kennth T. Mills and James M. Wilson on July 16, 2008 and is headquartered in Rockville, MD.
REGENXBIO had sales grow 746% over the past 5 years and $177% in 2019 alone.
The company has shown some profit in 2018. With that, stock price peaked to $80 per share. However, in 2019 there was a sudden drop in sales due to amended license agreement with AveXis for the development and commercialization of treatments for SMA research. At that time, stock price dropped to $30, however, since then rebounded to $49.
However, since then the company sales resumed healthy growth as it is getting revenue stream from royalties on commercial product sales. It also has a few products under development, all in different stages of research. Unfortunately, as the company has to support its massive size on lower revenue this year it is currently working at a loss.
Mean rating from 6 analysts covering the company is 4.5 meaning Overweight. The target price premium over the current price for RGNX is 56%.
As the company turned from profit to loss this year, it is slowly accumulating debt every quarter to pay for ongoing operations. Current debt ratios are still fine (over 1), but getting close to get into the dangerous zone of below 1.
Aurora Cannabis Inc. (NYS: ACB)
Last Year Sales Growth: 154%
Past 5 Years Sales Growth: 20283%
Aurora Cannabis, Inc. engages in the production, distribution and sale of cannabis products. It also produces and sells indoor cultivation systems and hemp related food products. The company was founded by Terry Booth and Steve Dobler on December 21, 2006 and is headquartered in Edmonton, Canada.
Similar to CRON discussed above, Aurora Cannabis (ACB) was struggling with getting to positive Gross Income. Over the past 3 quarters it actually managed to get to achieve that and started to even show some minimal profit.
The stock price movement over the past few years resembled closely the movements for the rest of cannabis stocks: over-excitement in 2017-2018 resulted in a sharp increase in stock price from as low as $0.40 to $12 in 2018. However, as investors were seeing the company cannot sell products at the cost of making them they sent the stock down to current $1.70. The next couple of quarters would be key for the company to show it can make money and show profit. With that the stock price is likely to appreciate very quickly.
Mean rating from 19 analysts covering the company is 3.1 meaning HOLD. Of 19 analysts 4 think the stock is a buy, 11 - hold, 4 - sell.
The target price for ACB stock is 2.08, which gives a premium over the current price for ACB of 21%.
Despite the company is not making much money in profit it raised enough when was issuing stocks. Debt levels are still quite low.
Amicus Therapeutics Inc. (FOLD)
Last Year Sales Growth: 137%
Past 5 Years Sales Growth: 3118%
Amicus Therapeutics, Inc. engages in the discovery, development, and commercialization of novel treatments for patients living with rare and orphan diseases. Its product include migalastat HCl, which is a small molecule that can be used as a monotherapy and in combination with enzyme replacement therapy for fabry disease. The company was founded on February 4, 2002 and is headquartered in Cranbury, NJ.
Amicus Therapeutics (FOLD) sales grew over 3,000% over the past year. In 2019, sales grew 137%.
The good thing about the company (as you can see above) that over the past 3 quarters it managed to slowly reduce its quarterly loss with the growth of sales. Usually, this is the trend that investors like to see in companies as 1) it shows the company is moving to profitability; 2) it makes it easier to project at what level of sales the company will turn profitable.
The company also was working on reducing expenses and has a strong Gross Profit margin of 86%. If it keeps doing that and maintains expenses and gross profit margin at current levels it will see first profitable quarter with sales of $128M per quarter. If it grows sales at current rate it will see that level of sales in just about a year and a half.
Mean rating from 11 analysts covering FOLD stock is 4.7 meaning BUY (quite strong buy I might say). 9 analysts think the stock is a buy, 1 - overweight, 1 - hold.
The target price for FOLD stock is 18.64, which gives a premium over the current price for FOLD of 82% which is the strongest premium from our set.
Price-to-Sales ratio is 17. For the company of such strong sales growth this is just above normal.
The company is doing very well in terms of its debt ratios.
Zillow Group Inc. (NAS: ZG)
Last Year Sales Growth: 117%
Past 5 Years Sales Growth: 236%
Zillow Group, Inc. engages in the provision of real estate and home-related information marketplaces on mobile and the web. The company operates through the following segments: Internet, Media & Technology (IMT), Homes and Mortgages segment. The IMT segment includes premier agent, rentals and new construction marketplaces, as well as dotloop, display and other advertising and business software solutions. The Homes segment includes Zillow Group's buying and selling of homes directly. The Mortgages segment includes advertising sold to mortgage lenders and other mortgage professionals, mortgage originations through MLOA and the sale of mortgages on the secondary market, as well as Mortech mortgage software solutions. The company was founded by Richard N. Barton and Lloyd D. Frink on July 25, 2014 and is headquartered in Seattle, WA.
Zillow Group (ZG) has grown its sales by 236% over the past 5 years which is not that much. However, I thought this stock is worth including in the list as its sales growth accelerated in the past year (117%). With a bit of slow growth in the past few years, investors seem to have lost interest to it, which lowered the price to a P/S ratio of only 4.8. However, with more investors turning their attention to ZG, the stock price is currently trying to make a turn-around as it is testing the $50 resistance level for the second time this year.
Analyst seem to have not yet realized the company is making a turn-around and give a mean rating of 3.4 which gives it a HOLD. The target price is also below the current price (target $44.95 vs. $50 stock price).
Next 2 quarters it is important to watch ZG earnings report to check if it continues to grow revenue at 25%-30% per quarter that we saw in the past 2 quarters.
Boston Omaha Corp. (NAS: BOMN)
Last Year Sales Growth: 101%
Past 5 Years Sales Growth: 5280%
Boston Omaha Corp. is a holding company, which engages in the provision of billboards, surety insurance, and insurance brokerage activities. It operates through the Insurance and Billboards segments. The Insurance segment refers to commissions from the firm's surety brokerage businesses. The Billboards segment includes billboard acquisition and rentals. The company was founded on August 10, 2009 and is headquartered in Omaha, NE.
Boston Omaha Corp. sales grew 5,280% over the past year and $101% in the past year.
With the growth in sales, the company also has finally shown a profitable quarter in September 2019 (with the help of unusual gain). The company does have a problem, thought. It currently reports Cost of Goods Sold that are above Revenue levels. This is a big no-no for investors as this does not provide for Gross Profit that is then used to cover other expenses and give profit to shareholders. Reducing cost of goods is the first thing to watch for an investor in this company. A reduction of cost of goods below the revenue levels would be the first sign to invest.
There is only 1 analyst covering BOMN stock and he/she gave the stock a BUY rating with a target price of $33 (60% premium over current price). The company seems to have no long-term debt.
Exact Sciences Corp. (NAS: EXAS)
Last Year Sales Growth: 85%
Past 5 Years Sales Growth: 1735%
EXACT Sciences Corp. is a molecular diagnostics company, which focuses on the early detection and prevention of colorectal cancer. It developed Cologuard, a screening test for the early detection of colorectal cancer and pre-cancer. The company was founded on February 10, 1995 and is headquartered in Madison, WI.
EXACT Sciences Corp (EXAS) sales grew 1735% over the past 5 years and 85% in the last year.
EXAS stock price is on fire as it went up from $10 in 2016 to $120 in the middle of 2019. In later 2019 - beginning of 2020 the stock took a breath as it declined to $76. However, it met resistance there and is currently trading at $95.
EXAS stock is quite liked by analysts. It is covered by 15 and they have a mean rating of 4.9 out of 5. The mean target price for EXAS stock is $123.5 which is 30% above current price.
The company is trading at P/S ratio of 17.
The company does not have issues with debt
eXp World Holdings Inc. (NAS: EXPI)
Last Year Sales Growth: 79%
Past 5 Years Sales Growth: 3644%
eXp World Holdings, Inc. owns and operates eXp Realty, which is a cloud-based international residential real estate brokerage. It focuses on the development and use of cloud-based technologies in order to grow an international brokerage without the burden of physical brick and mortar offices and redundant staffing costs. The company was founded by Glenn Darrel Sanford on July 30, 2008 and is headquartered in Bellingham, WA.
eXp World Holdings (EXPI) grew sales by 3644% over the past 5 years and by 79% in the past year.
The stock was trading at a high of $19.60 in 2018. In 2019 the stock price was hovering in a side channel between price points of $7.70 and $12.30 as it seems investors are waiting to see whether the company will be able to continue its growth and turn to profit.
EXPI stock is covered by 3 analysts who give a rating of 5 out of 5 and an average target price of $18.5 which is 59% above current price.
Also, the stock is trading at a P/S ratio of 0.9 which is quite low (good). However, there is also a reason for that: the company is operating at a very low gross profit margin, meaning with sales growth only a small portion of it will eventually hit the bottom line.
The company is doing OK in terms of debt.
Twilio Inc. (NYS: TWLO)
Last Year Sales Growth: 75%
Past 5 Years Sales Growth: 504%
Twilio, Inc. engages in the development of communications software, cloud-based platform, and services. Its platform consists of the following layers: engagement cloud, programmable communications cloud, and super network. The engagement cloud software addresses use cases like account security and contact centers and is a set of Application Programming Interfaces (APIs) that handles the higher-level communication logic needed for nearly every type of customer engagement. The Programmable communications cloud software is a set of APIs that enables developers to embed voice, messaging, and video capabilities into their applications. The super network is a software layer that allows customers' software to communicate with connected devices globally. The company was founded by John Wolthuis, Jeffery G. Lawson, and Evan Cooke in March 2008 and is headquartered in San Francisco, CA.
Twilio, Inc. (TWLO) grew sales 504% over the past 5 years and 75% over the past year.
The stock gave good return to its investors over the past 3 years as the stock price appreciated from $30 in 2017 to the highest point of $150 in the middle of 2019. Since then, the stock took a break and declined to $90, but quickly bounced back to $120.
One of the reasons for the stock bouncing back so quickly is the fact that analysts estimating profit for the next year. While the Future EPS is 643, this is still causing optimism when combined with fast growing sales.
There are 27 analysts covering TWLO. They provide a mean rating of 4.7 of 5 and a target price of $144.64 which is 18% above current price.
SolarEdge Technologies Inc. (NAS: SEDG)
Last Year Sales Growth: 74%
Past 5 Years Sales Growth: 291%
Recently I did a full, more in-dept analysis of the SEDG stock where I gave it a BUY rating. You can read it here: https://www.wininstocks.com/post/solaredge-technologies-inc-sedg-stock-analysis
SolarEdge Technologies, Inc. engages in the operation of inverter solution for the harvesting and managing of photovoltaic solar power. The company's products include power optimizer, inverter and monitoring portal. It offers residential solutions, commercial solutions, and grid services. The company was founded by Guy Sella, Lior Handelsman, Yoav Galin, Meir Adest and Amir Fishelov in 2006 and is headquartered in Hod HaSharon, Israel.
SolarEdge Technologies (SEDG) grew sales 291% in the past 5 years, which is not that much. However, in the past year, sales growth accelerated as the company grew sales by 74%. With that, the stock is on fire growing from $14 in 2017 to $110 in the past week.
The best thing about SEDG is that unlike many companies above it is profitable. It is also quite under-priced with a P/S score of 4 (which is low for a stock with such growth) and a PEG (price-to-earnings-to-growth) of 0.8. Usually a PEG score of 1 is considered to be good. Anything below 1 means the stock is undervalued.
There are 11 analysts covering SEDG stock with a mean rating of 4.3. The target price does not catch up with the recent stock price growth as the target average price target currently being below the stock price. In any case, with the current P/S and PEG scores the stock is clearly undervalued.
Lyft Inc. (NAS: LYFT)
Last Year Sales Growth: 63%
Past 5 Years Sales Growth: 852%
Lyft, Inc. operates as an online social rideshare community platform. It helps commuters to share rides with friends, classmates, and co-workers going the same way. The company was founded by Marcus Cohn, John Zimmer, Rajat Suri, Matt van Horn, and Logan Green in June 2012 and is headquartered in San Francisco, CA.
Lyft, Inc. (LYFT) grew sales by 852% in the past 5 years and by 63% over the past year. The stock went on stock exchange with an IPO less than a year ago and the investors did not yet agree on the fair price for the stock as it has declined from $84 at the moment of IPO to $38-$50 range.
The company P/S score is quite good at 4.3. The key problem for the company is getting to profitability. Currently its Gross Profit Margin sits at 23%. Also, it is spending $720-$750M on SG&A expenses every quarter. If it does not find a way to either increase Gross Profit Margin or reduce SG&A expenses it will see its first profitable quarter when quarterly sales reach $3.1B.
Now, it is definitely possible to reach that level of sales as this is how much UBER has in sales every quarter, but:
1. UBER is now growing at much lower rates in sales
2. UBER is not going to be just letting LYFT take over.
3. At current rate of sales growth it will take LYFT 2.5 years to get to that level of sales (again, if sales don't slow down)
There are 38 analysts covering LYFT. Mean rating is 4.2 and target price is $65.79, which is 32% above current price.