Investors who have been around the block once or twice know that outstanding growth stocks aren't always those with the most fanfare. With that in mind, we've unearthed a few stocks for shrewd investors across multiple industries that warrant consideration. They include data-security provider FireEye (MNDT), mining-leader Barrick Gold Corp (GOLD 1.58%), and sports-and-recreation retailer Vista Outdoor (VSTO -0.61%).
The future starts now
Tim Brugger (FireEye): For investors with an eye toward the future, data-security upstart FireEye is positioned for long-term growth. FireEye's 3% increase in revenue last quarter was a pleasant surprise, and helped drive its already-rising stock price up even further. But it was the execution of FireEye's expense-management and efficiency initiatives that makes it a growth stock for shrewd investors.
When CEO Kevin Mandia took the reins last summer, he immediately pared a bloated workforce -- primarily sales and marketing staff -- and implemented a shift from FireEye's reliance on new sales to building cloud-based, recurring revenue via software subscriptions.
Cost of revenue declined nearly 10% last quarter, to $68.6 million, and FireEye's operating expenses nosedived a whopping 29%, to $180.85 million. FireEye certainly has more work to do in its efforts to return to profitability, but Mandia and team are hitting all the right buttons. Thanks to its cost-cutting efforts, FireEye reported just a $0.48 per-share loss, less than half last year's negative $0.98 a share.
As for subscription-related recurring revenue, the 12% jump in sales, to $150 million, last quarter more than made up for the $10 million drop in product sales, to $23.7 million. It will also be interesting to note the impact that FireEye's newish end-to-end cloud-based Helix data-security solution has on the recent quarterly results, scheduled for Aug. 1, now that it's readily available to the masses.
In a market expected to generate $1 trillion in revenue over the next four years, the timing of FireEye delivering on its initiatives couldn't be better.
Digging up value in gold
Neha Chamaria (Barrick Gold Corp): As a shrewd investor, you'd know how to find value in a stock of a fundamentally strong company that's facing the heat of short-term bumps. Gold-mining giant Barrick Gold is a great example.
To be fair, Barrick is facing several challenges, including a major tax dispute between the Tanzanian Government and Acacia Mining, which is largely owned by Barrick. Before that, a full-year production-outlook downgrade in April had spooked investors and sent Barrick shares tumbling. As of this writing, Barrick has lost 18% of its value in just the past three months.
However, Barrick is a value buy right now, given its strong fundamentals. The miner's production will be lower this year because of a stake sale in its Veladero mine; otherwise, Barrick's key mines are in good shape.
Furthermore, Barrick's targeted full-year all-in-sustaining-cost guidance of $720-$770 per ounce of gold is among the lowest in the industry. Cost efficiency is a key parameter of strength in the gold industry. Barrick also strives to remain free-cash-flow positive at gold prices of $1,000 an ounce, which could mean stable dividends for shareholders going forward. And as the largest gold-mining company in the world, Barrick would be the biggest beneficiary if bullion prices rise.
Given the backdrop, I think shrewd investors would consider Barrick a value bet at seven times operating cash flow. I believe Barrick's management is capable of overcoming the headwinds the best possible way, and if they can successfully do so, the stock should give back good returns to patient investors.
Ready to shoot out the lights?
Rich Duprey (Vista Outdoor): While Smith & Wesson and Sturm, Ruger have taken hits as a result of what seems to be a slack in demand for firearms, Vista Outdoor was absolutely crushed earlier this year when it was revealed it had been blindsided by both the November elections and changes in consumer preferences for guns. This caused the company to take a non-cash impairment charge of as much as $450 million.
Vista's stock plunged, losing a quarter of its value in one day, and then went on to lose more than half its value over the next few months. While the election of Donald Trump as president seemed to remove the demand for gun purchases, Vista said customers were shifting their preferences toward "certain firearms platforms outside the Company's firearms offerings." Vista owns Savage Arms, which makes rifles and shotguns primarily for hunting. Concealed-carry handguns, however, have been the firearms of choice for many gun buyers these days.
The president of Vista's outdoors division resigned "to pursue other activities," and just recently, its chairman and CEO abruptly retired from the company, too. Shares of Vista Outdoor have bounced 25% above the lows they hit, though the stock remains some 56% below its 52-week high -- which is why a shrewd investor might want to take a closer look at the shooting-sports and outdoor-recreational-products retailer.
It trades at less than 14 times next year's earnings estimates and at a fraction of its sales. Moreover, analysts forecast Vista will still grow its earnings at 25% annually for the next five years. Last month, Smith & Wesson owner American Outdoor Brands reported fiscal 2016 fourth-quarter results that showed long-gun sales rose 40%, and it shipped long guns at twice the rate of handguns.
Preferences for the types of firearms bought will ebb and flow over time. Though Vista Outdoor ran into some headwinds early on, it ought to be on target for future growth as it puts fresh faces in the C-suite.