Growth stocks have been among the best performing securities this year. These companies defied the economic slump to report impressive results amid the coronavirus pandemic. This is evident in SPDR Portfolio S&P 500 Growth ETF’s (SPYG) 29.2% gain over the past year versus the SPDR S&P 500 ETF Trust’s (SPY) 14.4% returns.
This trend is likely to continue in 2021 because the successful development of vaccines has made investors optimistic about a gradual economic recovery, which is typically a great driver for growth stocks. The recently passed $900 billion U.S. fiscal stimulus bill, the second largest recovery package in the nation’s history, has bolstered investor confidence too and may pave the way for a V-shaped recovery.
Companies such as Trupanion, Inc. (TRUP), GrowGeneration Corp. (GRWG) and Fulgent Genetics, Inc. (FLGT) have generated growth despite the pandemic’s disruptions. Their unique business models and strategic expansions we think should translate to more upside this year.
Trupanion, Inc. (TRUP)
TRUP is a medical insurance provider for pets based on a monthly subscription basis in the United States and Canada. It operates through two segments: Subscription business and Other business.
In October, TRUP entered an exclusive agreement with Japanese company Aflac, Inc. (AFL) to sell pet insurance at worksites across the United States. TRUP will be able to leverage Aflac’s broad U.S. worksite distribution network, including its digital Consumer Markets channel, as well as expand its foothold in the Japanese markets.
TRUP’s revenue has increased at a CAGR of 26.7% over the past three years, while its total assets rose at a CAGR of 46% over the same period. This reflects the company’s strong growth potential.
TRUP’s revenue has increased 31.1% year-over-year to $130.12 million in the third quarter ended September 30, 2020. Its Gross profit has increased 18.0% year-over-year to $20.59 million over the same period, while free cash flow has grown 190.4% year-over-year to $8.53 million.
Analysts expect TRUP’s revenue to grow 32% to $139.26 million in the last quarter ended December 31, 2020. The consensus EPS estimate for the fiscal year (ending December 31, 2021) represents a 54.5% improvement from the current year. The company has an impressive earnings surprise history as well; it beat the Street EPS estimates in three of the trailing four quarters. TRUP has gained 219.6% over the past year.
How does TRUP stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
B for Peer Grade
B for Industry Rank
B for Overall POWR Rating.
The stock is currently ranked #9 of 72 stocks in the Medical – Services Industry.
GrowGeneration Corp. (GRWG)
GRWG is a farm supply company that operates retail hydroponic and organic specialty gardening outlets in the United States. The company also operates GrowGen.Pro, an online ecommerce store, which carries and sells a wide variety of products, such as organic nutrients and soils, advanced lighting technology, and hydroponic equipment to be used indoors and outdoors by commercial and home growers.
In November , GRWG completed its acquisition of The GrowBiz, the nation’s third-largest chain of hydroponic garden centers. This acquisition will bring the total number of GrowGen hydroponic garden centers to 36, thereby increasing its foothold in several new markets.
On December 15th, GRWG acquired Grassroots Hydroponics, a three-store chain of hydroponic garden centers. This will help them penetrate the markets of Southern California.
Also in December, GRWG acquired Southern California-based Canopy Crop Management and its complete portfolio of products, including the Power SI brand of silicic acid-enriched fertilizers to expand its portfolio of private label products within the nutrient and additive space. This is a strategic move to generate revenue in the long-term.
GRWG’s revenue has increased at a CAGR of 128.9% over the past three years, while its total assets rose at a CAGR of 140.9% over the same period. The company’s impressive track record positions it well to emerge as a leading player in the farm supply industry.
GRWG’s revenue increased 152.6% year-over-year to $55.01 million in the third quarter ended September 30, 2020. Its adjusted EBITDA increased 230.2% year-over-year to $6.58 million over the same period, while its EPS rose doubled year-over-year to $0.06.
Analysts expect GRWG’s revenue to grow 124.1% to $56.89 million in the current quarter ended December 31, 2020. A consensus EPS estimate of $0.06 for the current quarter indicates a 700% rise year-over-year. The stock has gained 881% over the past year.
It is no surprise that GRWG is rated “Strong Buy” with an “A” for Trade Grade and Peer Grade and a “B” for Buy & Hold Grade and Industry Rank. It is currently ranked #15 of 68 stocks in the Home Improvement & Goods Industry.
Fulgent Genetics, Inc. (FLGT)
FLGT provides comprehensive genetic testing solutions to physicians with clinically actionable diagnostic information to improve quality of patient care. Its proprietary tech platform integrates data comparison and suppression algorithms, adaptive learning software, advanced genetic diagnostics tools, and integrated laboratory processes. The company primarily serves hospitals and medical institutions.
In November, FLGT partnered with the Los Angeles Network for Enhanced Services (LANES) and LA County Department of Health Services (DHS) to exchange coronavirus tests data and results. This will help FLGT to secure access to the most relevant test data as COVID-19 infections hit record levels in LA County.
FLGT’s revenue has increased at a CAGR of 88.1% over the past three years, while its total assets rose at a CAGR of 61.5% over the same period.
FLST’s revenue have increased 883% year-over-year to $101.72 million in the third quarter ended September 30, 2020. This can be attributed to its efficient scale testing capabilities that offer fast, accurate and reliable COVID-19 testing solutions. Its adjusted EBITDA has increased 2,184.5% year-over-year to $67.39 million over the same period, while its non-GAAP EPS rose 1,385.7% year-over-year to $2.08.
Analysts expect FLGT’s revenue to grow 1789.7% to $158.49 million in the current quarter ended December 31, 2020. The consensus EPS estimate of $2.91 for the current quarter indicates a 7175% rise year-over-year. FLGT has gained 303.9% over the past year.
FLGT’s POWR Ratings reflect this promising outlook. It has an overall rating of “Strong Buy” with an “A” for Trade Grade, Buy & Hold Grade and Peer Grade. It is currently ranked #29 of 60 stocks in Medical – Diagnostics/Research Industry.
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TRUP shares were unchanged in after-hours trading Tuesday. Year-to-date, TRUP has declined -2.71%, versus a -0.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...
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