If you have analyzed the myriad earnings reports over the summer of 2013, the trend that you will notice is a lack of revenue growth from most major companies. Many have continued to grow earnings because of cost containment and share buybacks, but the problems in Europe have caused slower spending and growth in Asia and in emerging markets. That is the bad news. The good news is that some public companies would still be considered as extreme growth stocks. In fact, some companies are still doubling their revenues.
24/7 Wall St. has evaluated many existing public companies to identify ones with high growth rates. With 2013 now in the second half, we wanted to look at a group of public companies that are expected to double their sales in the next few years. Our main focus is for companies expected to double sales by the end of 2016 from the end of 2012, but a couple may take until 2017 or so. Doubling sales at a time of slow economic expansion is very impressive whether it takes three and a half years or four and a half years.
In order to not have the deck stacked with small tiny companies that most people have never heard of, we tried to avoid repetitive industries. There almost always seems to be some small turnaround company or some smaller companies in biotech and software that are growing rapidly. We wanted to broaden the search for companies expected to double their revenues.
In some cases you will see that the company has itself projected that it plans to double its sales. In other cases, it is the group of analysts covering each company that are forecasting sales to double. Some of these public companies will double as soon as 2014, while others will not realize their doubling in sales until 2015 or 2016.
We would also warn that this rapid growth can come at an expensive price. We have shown a 52-week trading range on each public stock, and we have given a forward price-to-earnings (P/E) ratio for the fiscal year ahead so that you can see how Wall Street is valuing the stock based on current share prices.
The 24/7 Wall St. list of public companies expected to double sales in the next few years includes the following: Kona Grill Inc. (NASDAQ: KONA), LinkedIn Corp. (NYSE: LNKD), Noodles & Co. (NASDAQ: NDLS), Onyx Pharmaceuticals Inc. (NASDAQ: ONXX), Michael Kors Holdings Ltd. (NYSE: KORS), Questcor Pharmaceuticals Inc. (NASDAQ: QCOR), Tesla Motors Inc. (NASDAQ: TSLA), Under Armour Inc. (NYSE: UA), Workday Inc. (NYSE: WDAY) and Yelp Inc. (NYSE: YELP). Facebook Inc. (NASDAQ: FB) might as well be considered a runner-up here, but it was a direct competitor of LinkedIn in the selections.
We looked at past sales growth, expected or stated sales growth expectations ahead, where the stocks have traded and what their market capitalization rates are now, and we even gave a forward earnings projection to see how much you have to pay up for such strong growth. A detailed analysis of each company follows.
Kona Grill Inc. (NASDAQ: KONA) is the smallest growth chain by far of the companies we analyzed. Frankly, this may be tied to a doubling off of a smaller base since its market cap is a mere $100 million. At $12.35, its stock has a 52-week range of $7.80 to $13.90. Sales in 2012 were $96 million, and the 2013 growth might not indicate a doubling. It said at the start of August with earnings that its second-quarter restaurant sales increased 3.2% to $25.8 million and its same-store sales increased 2.5%. Berke Bakay, president and CEO, said, “The sales growth is a testament to the strength of our brand. … Our vision over the next five years is to double our sales, which translates to an approximately 15% compounded annual growth rate.” Kona trades at roughly 25 times expected 2013 earnings expectations.
LinkedIn Corp. (NYSE: LNKD) is the social network for professionals, and now the company wants to swoop its expansion down to the student level. This may come with a risk. It trades at $230.79 in a 52-week range is $94.75 to $244.00, and its market cap is almost $26 billion. The company already has doubled sales more than once and is expected to keep doing so. Revenue was $972 million in 2012, versus $522 million in 2011 and up from $243 million in 2010. It is widely expected that sales will double again by the end of 2015. Thomson Reuters has a consensus revenue target of $1.51 billion for 2013, and that is expected to be $2.14 billion for fiscal year 2014. In short, LinkedIn’s sales doubling should happen shortly before the end of 2014. Facebook would also be in this social media doubling camp as well, but LinkedIn actually is expected to grow faster than Facebook, according to analysts. LinkedIn is valued at a whopping 105 times expected 2014 earnings, versus a valuation of about 40 times expected 2014 earnings from Facebook.