There are few stocks that have been more exciting over the past few years than Amazon.com (NASDAQ:AMZN). Shares of the e-commerce and cloud computing giant have soared nearly 190% over the past three years, driven higher by unrelenting revenue growth and investor euphoria. The story that Amazon is disrupting a wide variety of industries, including grocery and logistics, has proven powerful enough to make investors forget about the company's perennially meager bottom line.
While it's impossible to predict which stocks will produce Amazon-like returns in the future, a few have the potential. Here's why three of our Foolish investors think shares of Universal Display Corp. (NASDAQ:OLED), Fitbit (NYSE:FIT), and Novavax (NASDAQ:NVAX) could surge even more than Amazon.
This flat-screen specialist is growing like Amazon
Rich Smith (Universal Display Corporation): Amazon stock has gained roughly 280% in price over the past five years. Finding a stock that can match that growth rate over the next five years won't be easy -- but I know a good place to start.
According to the venerable Warren Buffett, patron saint of value investors, "In the short term, the market is a popularity contest. In the long term, the market is a weighing machine." And what this tells me is that Amazon's strong price performance over the past five years is more likely than not a function of its strong business performance.
How strong is Amazon, you ask? According to data from S&P Global Market Intelligence, Amazon's stock performance has been matched by growth in both sales and profits over the past five years, up 22.5% and 38.5% compounded, respectively. So how can you find stocks with similar potential for their prices to soar? I'd start by screening for businesses that have grown their sales and earnings as fast as -- or faster than -- Amazon has.
Stocks like Universal Display Corporation.
Over the past five years, flat screen technology specialist Universal Display has grown sales faster than Amazon (nearly 26% compounded) and shown earnings growth nearly as good as Amazon's (roughly 31%). Like Amazon, Universal Display stock sells for a premium price-to-earnings (P/E) ratio -- 93 times earnings (albeit that's only half Amazon's own P/E ratio of 181). Like Amazon, Universal Display stock is also a strong cash producer, generating roughly $86 million in positive free cash flow over the past 12 months, despite reporting earnings of $82 million.
Is Universal Display stock a bargain? At these prices, it sure doesn't look like one to me. Then again, five years ago, I probably wouldn't have called Amazon stock a bargain, either (and look how that turned out). As the tech industry evolves from plasma to LED to OLED and beyond, I wouldn't put it past Universal Display to amaze investors with Amazon-like growth.
Looking to make a comeback
Tim Green (Fitbit): Fitness wearables company Fitbit has finally unveiled its first proper smartwatch, the Ionic. The watch will retail for $300 when it launches in October, going head-to-head with the more expensive Apple Watch. New products like Ionic and wireless headphones are the key to Fitbit's turnaround strategy.
There is no guarantee that Ionic will be a success. Fitbit opted to build its own operating system, which means that third-party app support will be meager at launch. Apps from Pandora, Starbucks, and AccuWeather will be available, as well as Fitbit Pay, the company's mobile payment system. But getting developers on board will be a challenge. The Ionic does have one killer feature: A battery life of 4-plus days, or 10 hours of actively using GPS or playing music. That may be enough to sway some users to opt for Fitbit's device over the alternatives.
Fitbit stock has tumbled 88% since peaking in 2015. The market values the company at just $1.4 billion, less than the low-end of Fitbit's 2017 revenue guidance. Back out the net cash on the balance sheet, and the market is valuing Fitbit at just about $725 million. Expectations, in other words, are rock-bottom. If the Ionic is anything close to a success, Fitbit stock could explode higher, potentially producing Amazon-like returns.
An exceptional commercial opportunity
George Budwell (Novavax): Respiratory syncytial virus (RSV) is a common respiratory ailment that can, on occasion, pose a serious threat to both infants and elderly adults. Unfortunately, biopharma companies have so far been unable to produce an effective prophylactic treatment for RSV for either young children or older adults. And that's why the clinical-stage vaccine-maker Novavax may turn out to be a once-in-a-lifetime type of investing opportunity.
Novavax is presently attempting to development an F-protein nanoparticle RSV vaccine that can be administered in conjunction with seasonal flu shots in elderly patients, as well as a vaccine for pregnant mothers that can confer immunity to newborns during the first few months of their lives.
Like most experimental RSV treatments to date, though, things haven't exactly gone to according to plan. Last year, Novavax's late-stage trial for elderly adults went off the rails due to a mild RSV season -- at least according to the company. And the vaccine's midstage maternal data weren't overwhelmingly significant. Put simply, Novavax's high-value RSV vaccine -- that could be worth billions if approved -- appears to be a long shot at best at this stage.
On the flip side, if Novavax can indeed pull a proverbial rabbit out of its hat and push this vaccine across the finish line, the company's stock would undoubtedly appreciate in Amazon-like fashion from current levels. Novavax, after all, presently sports a market cap of $307 million, which is only a tiny sliver of the massive commercial opportunity presented by this unmet medical need.
George Budwell has no position in any of the stocks mentioned. Rich Smith has no position in any of the stocks mentioned. Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, AAPL, Fitbit, Pandora Media, Starbucks, and Universal Display. The Motley Fool has a disclosure policy.