There's no question that Facebook (META 2.53%) has been a blowout winner in its five years on the stock market. Though the social network got off to a slow start, the stock is now up 363% since its initial public offering in 2012; it's now one of the most valuable companies in the world, worth more than $500 billion. However, its revenue and profit growth are expected to slow as the company says it has maximized ad load -- the number of ads it shows each user. Considering that factor, and the stock's already giant market cap, Facebook's best growth days are probably behind it.
For investors looking for another shot at that kind of growth, GrubHub Inc. (GRUB), Centennial Resource Development, Inc. (CDEV 1.63%), and SolarEdge Technologies, Inc. (SEDG 4.39%) fit the bill. Below, a panel of our contributors explain why.
Connecting people in a different way
Jeremy Bowman (GrubHub): Facebook's mission has always been about connecting people to each other. GrubHub, meanwhile, connects people with something just as important -- food. It's the nation's leading restaurant-takeout marketplace, giving millions of diners easy access to local restaurants, and allowing them to order conveniently and quickly through a range of smartphone apps and websites.
2017 has been a banner year for the delivery specialist, with shares up 90%; the company has consistently topped expectations in its earnings reports and made smart strategic moves, including a number of acquisitions. As part of a long-term partnership with Yelp, GrubHub took over delivery site Eat24 for $287.5 million; this gave it the top spot in food-delivery market share in 13 of the 22 biggest cities in the country, which has helped it defend itself against competitors like Amazon.com and Uber.
Acquiring Foodler, and 27 of OrderUp's markets from Groupon, also strengthened GrubHub's leadership. So did a partnership with Facebook that connects Facebook users with third-party delivery apps like GrubHub.
Since GrubHub still considers traditional takeout ordering by phone to be its primary competition, the company should have a long tail of growth ahead as it gradually converts new users. Profit margins, which are already around 10%, should also scale up as the company gets bigger and absorbs new acquisitions.
A high-octane oil stock
Matt DiLallo (Centennial Resource Development): Shale driller Centennial Resource Development has grown exponentially since forming late last year. The company quickly completed a series of deals to lock up acreage in the lucrative Permian Basin, which gave it the resources to fuel jaw-dropping growth in oil production. In just the last quarter alone, oil production has risen 21% to 21,108 barrels per day, which sent output up 101% since the start of the year. That rapidly growing production has driven Centennial Resource Development's stock up more than 100% since the current management team took over in October 2016.
However, this shale driller still has plenty of room to run. Its objective is to achieve the best equity performance of any oil stock in its peer group over the next few years. To reach that target, the company plans to deliver best-in-class production growth, with the aim of boosting oil output to 60,000 barrels per day by 2020. That rapidly rising production in a stable oil price environment should fuel tremendous cash flow and profit growth, which could drive Centennial's stock skyward.
Centennial's exposure to oil prices does make it a riskier option, because it's possible that crude might not cooperate and could take a nosedive. However, that volatility goes both ways since oil could continue recovering, which is the scenario Centennial's CEO sees based on his belief that the market has overestimated the ability of shale drillers to keep growing. If this prediction comes to fruition, and crude soars, it would provide even more fuel for Centennial's stock.
An integral player in the fast-growing solar market
Maxx Chatsko (SolarEdge Technologies): Shares may have gained roughly 200% in 2017, but SolarEdge is well-positioned for long-term growth. The company offers one of the leading solar inverters -- the pieces of hardware that convert direct current (DC) generated from a solar panel to alternating current (AC) used by the American electrical grid -- available on the market, and investors are starting to catch on.
Then again, it's been difficult to ignore the tremendous market traction demonstrated by the solar inverters. In the third quarter of 2017, revenue grew 30% and earnings per share 73% compared to the year-ago period. That growth shows no sign of slowing.
That's partially because SolarEdge has taken solar inverters one step beyond the competition by adding a charger into the mix; while this is required for a complete solar-plus-energy-storage solution, it's usually a separate component. The combo reduces the overall system's footprint, complexity, and cost -- and makes it even easier for rooftop-solar providers to choose the company's products.
In the future, it would make sense for SolarEdge to offer a complete package, or one system that includes the inverter, charger, and energy storage unit. That would provide a major advantage in the solar industry, give tremendous value to homeowners, and create a massive opportunity for long-term, high-margin growth.