If you invested $100 in a broadly diversified index fund that tracked the S&P 500 in early 2015, you'd have $136 today, not counting the dividends you collected. Many individual stocks performed far better than that over the past three years, though.
Winnebago: A major acquisition
Winnebago has been making recreational vehicles (RVs) since 1959, but only recently have shares become very popular on Wall Street. The stock gained 75% in 2017, trouncing the broader market's 19% increase.
That rally was supported by a healthy RV industry that's now in its ninth consecutive year of expansion. But the bigger driver was Winnebago's game-changing acquisition of rival Grand Design. That merger immediately added nearly $600 million to its annual revenue base, and pushed sales up by 60% in the most recent fiscal year.
Grand Design's product lineup skews toward smaller, towable RVs, which is the segment that's seeing the most growth these days. Towable RV sales typically generate higher profits, too, which helps explain why Winnebago's gross profit margin jumped to 14.4% of sales last year from 11.6% in the prior year.
The company has its work cut out for it in the new year as it expands capacity, cuts costs, and tries to keep its product offerings fresh in a competitive industry. But these challenges are all easier to meet now that it has a broader RV lineup and bigger economics of scale.
The Children's Place: Succeeding in a tough market
The Children's Place's revenue was essentially the same in fiscal 2016 as it was two years before, which makes the apparel retailer an odd candidate for a major share-price rally. Look beyond that top-line result, though, and you'll see why investors are cheering this company on.
The retailer's gross and net profitability figures have both jumped higher lately, thanks to several successful strategic initiatives, including a popular digital offering, aggressive cost cuts, and better inventory management. These positive trends combined to send net income higher by 77% in fiscal 2016 -- past $100 million.
CEO Jane Elfers and her executive team are targeting a further 20% earnings improvement in 2017, which will require that the company perform well during the key holiday selling quarter. It entered the period with strong momentum, as comparable-store sales increased 5% in the fiscal third quarter, marking the retailer's eighth-consecutive quarter of positive comps.
iRobot: Focusing on the consumer
iRobot shares have come down a bit from recent highs, but they've still more than doubled shareholders' money in the past three years. The robotic-device specialist's shift toward the consumer niche -- away from less-attractive areas like defense and security -- continues to pay big dividends today. Sales are up 24% over the last nine months, and gross profit margin has expanded to 50% of sales from 47% a year ago.
Wall Street is worried that these improvements will be reversed as competition floods into the robotic-cleaning niche. That worst-case scenario could happen, especially if the company stumbles through a string of weak product launches.
But iRobot has impressive competitive advantages that suggest it could climb higher. First, its treasure trove of patents should keep it ahead of the game through future iterations of its robot releases. And second, the company's dominant market position -- 64% of the robotic-vacuum market -- gives it flexibility to defend against those cheaper, lesser-known brands.
As robotic vacuums expand from their current 10% share of the industry, iRobot investors are hoping that this leading brand will capture more than its fair share of the extra sales, and drive even bigger stock-price gains in the years ahead.