3 stocks that have the potential to earn 5 times in the next 2 years
Some stocks that have smaller market capitalizations than large technology firms tend to move more. By this is meant the greater volatility of these titles, as it takes much less to move their price. For a stock to appreciate that much in 2 years, it would need an average annual growth rate of about 124%. The overall average annual stock market gain over many decades is closer to 10%. Five times over a decade still beats the market average because we are talking about growth of about 17.5% per year. The numbers are high and therefore may not be 100% true either. Even so, several companies have managed to do it in less time in the past, so let's take a look at today's 3 stocks.
1. Paycom Software $PAYC+2.7%
Paycom Software is an American company that provides software solutions for human resource (HR) management and payroll services. Their platform allows organizations to simplify and automate processes related to recruiting, employee data, scheduling, payroll, leave, and other HR operations.
Paycom Software enables job posting, candidate sourcing, job application management and electronic signing of employment contracts. It also allows employers to create shift schedules, track employee attendance, manage breaks and leave, and generate timesheets and payroll summaries.
Aptiv PLC
APTVPaycom Software recently reached a market value of nearly $19.5 billion, so a fivefold growth would mean nearly $100 billion. Is that reasonable? Well, anything is possible in the stock market - as long as it beats expectations that call for annual growth over the next five years near 22%.
The stock does indeed look undervalued, with a recent price-to-sales ratio of 12, well below its five-year average of 20, and a forward price-to-earnings (P/E) ratio near 42 - also well below its five-year average
The company is growing well, with first-quarter sales up 28% year-over-year and GAAP net income up 30%. Revenues over the past 12 months are up 75% year-to-date, while earnings per share (EPS) have more than doubled.
The company has plenty of room to grow and is expanding abroad. CEO Chad Richison noted: "Our Q1 2023 results were excellent, with massive revenue growth from new clients and rising margins as demand for automation and our easy-to-use HCM solutions continues to grow..."
2. Aptiv $APTV+3.9%
Aptiv is a global technology company focused on developing and manufacturing innovative systems and components for the automotive industry. Its products and technologies focus on vehicle safety, connectivity and electrification. Aptiv was originally part of Delphi Automotive, but was spun off in 2017 to form a separate company.
Aptiv works with automotive manufacturers and other automotive partners to bring innovative technologies to vehicles around the world. Its goal is to contribute to the development of safer, greener and connected vehicles of the future.
Aptiv PLC
APTVCEO Kevin Clark explained that "Aptiv is a technology company that will usher in the next generation of active safety, autonomous vehicles, smart cities and connectivity. We bring decades of experience solving our customers' toughest challenges with the spirit and ingenuity of a start-up."
Aptiv is growing rapidly and delivered record GAAP revenue of $4.8 billion in the first quarter , up 15% year-over-year, near-record bookings and net income that doubled from year-ago levels.
This despite prevailing chip shortages and inflation-induced problems. Aptiv's customers include General Motors, Ford Motor Company, Tesla and Stellantis (which owns the Jeep and Dodge brands) - along with about 20 other major automakers.
Aptiv's market value was recently $27 billion, so a fivefold increase would mean about $135 billion. Its stock looks undervalued at recent levels, with a price-to-sales ratio of 1.5 behind the five-year average of 1.9 and a forward P/E of 23 below the five-year average of 27.
3. Redfin $RDFN+5.1%
Redfin is a real estate company that focuses on an innovative approach to selling and buying real estate. Redfin provides an online platform and mobile apps that allow users to browse available properties, find a real estate agent, view photos and virtual tours, get pricing information and more.
Redfin allows property owners to sell their house or apartment through its online platform. It offers professional photography, online listing and marketing support to maximize the visibility and marketability of properties.
Redfin Corporation
RDFNRedfin's stock has plunged nearly 90% from its high in early 2021, but there are plenty of reasons to be optimistic about its future.
For one thing, its shares seem quite undervalued, with a recent price-to-sales ratio of 0.6, well below the five-year average of 3.2. The property market is subdued at the moment, partly due to inflation and higher interest rates. But these are likely to be temporary problems, and when the market bounces back, Redfin could ride it out.
The first quarter results marked a big drop in earnings due to the current challenging market environment. The company also had a smaller-than-expected net loss of $61 million, down from a year ago. A loss of $90 million. Management expects the company to be profitable by the end of 2023.
This is not a financial advisory business. I am providing publicly available data and sharing my views on how I would handle myself in these situations. Investing is risky and everyone is responsible for their decisions.
