Nobody likes a flash in the pan. Share prices soaring sky-high will only frustrate investors if the massive gains are lost in a hurry. What you really want is sustainable growth over a long period.
Finding these market-beating tickers isn't easy, so we asked a few expert growth investors here at The Motley Fool to help out. Read on to see why our panelists expect Albemarle (NYSE:ALB), NVIDIA (NASDAQ:NVDA), and SolarEdge (NASDAQ:SEDG) to extend their impressive market gains even further.
A high-growth chipmaker
Leo Sun (NVIDIA): Shares of NVIDIA surged 130% over the past 12 months, as the chipmaker's sales rose on robust demand across multiple high-growth markets. NVIDIA dominates the market for gaming and professional visualization GPUs, while its high-end GPUs are frequently used in data centers for machine learning purposes.
Its Tegra CPUs power infotainment and navigation systems in high-end cars, and its Tegra-powered Drive PX platform turns regular vehicles into autonomous ones. In recent quarters, the cryptocurrency market boosted sales of gaming GPUs, while sales of the Tegra-powered Nintendo (NASDAQOTH:NTDOY) Switch lifted its CPU sales.
NVIDIA's revenue and non-GAAP earnings rose 41% and 61%, respectively, in fiscal 2018 (which ended on Jan. 28). For the current year, analysts expect 28% sales growth and 35% earnings growth. Those solid growth rates support NVIDIA's slightly higher forward P/E of 34.
But NVIDIA still has plenty of irons in the fire. More automakers will buy more chips on higher demand for connected and driverless cars. Big tech companies will install more of its GPUs alongside CPUs in data centers for AI purposes, and its next-gen Volta GPUs should impress its core gaming market.
However, NVIDIA still faces some headwinds. Cryptocurrency miners could abruptly flood the market with cheap GPUs. AMD's (NASDAQ:AMD) new GPUs and APUs could lure away budget and mid-range gamers, while new competitors in the auto market -- like NXP (NASDAQ:NXPI) -- could cause headaches. Nonetheless, I believe that NVIDIA's strengths outweigh these weaknesses and that it still has room to run.
The world's top lithium producer
Maxx Chatsko (Albemarle Corporation): Shares of the world's most productive lithium supplier have more than doubled since the start of 2016, but things may just be getting started.
Selling prices for both major lithium products, lithium carbonate and lithium hydroxide, have topped $20,000 per metric ton (MT) in recent months. While producers old and new are increasing production capacity, demand from battery manufacturing facilities will continue to outpace supply for the next several years at least. That bodes well for Albemarle, which has received incredible contributions from its lithium segment in recent years.
In the first nine months of 2017, the company's lithium segment achieved revenue growth of 37% and adjusted EBITDA growth of 46% compared to the prior-year period. That's incredible, but consider this: Lithium sales increased $255 million in that period, while total revenue grew just $233 million. The same scenario played out for adjusted EBITDA, which proves just how important lithium is to Albemarle's business.
The company is going full steam ahead with capacity expansion plans to fill long-term supply orders from lithium-hungry customers. Perhaps it's forging ahead too quickly. Albemarle recently announced it had developed a new process technology that would allow it to boost total lithium production from its operations in Chile to 125,000 MT per year.
There's just one problem: Albemarle's agreement with the Chilean government only allows it to produce 80,000 MT per year. That can be rectified, and likely will thanks to a new pro-business and pro-mining administration, which creates the opportunity for an additional 45,000 MT per year of production from existing assets. Considering most new lithium projects will sport a production capacity of 50,000 MT once ramped up (and after receiving hundreds of millions of dollars in investment), that's no minor detail for investors looking for growth.
Sunny days ahead
Anders Bylund (SolarEdge): This stock didn't just double over the last year. With a 215% return in 52 weeks, the maker of power optimizers and inverters for solar panel arrays more than tripled. And I think the gains are just getting started.
We're talking about something as rare as a profitable business in the solar industry. SolarEdge can deliver strong and rising profits thanks to a unique market position -- there's really no direct competition to the company's power optimizers, which can squeeze out the last drop of power from a set of solar panels with uneven performance. That's effectively every set of solar panels in existence, since there's no such thing as a completely perfect setup where every panel delivers optimal power output at all times.
So SolarEdge's revenue grew 70% year over year in the recently reported fourth quarter. At the same time, bottom-line earnings nearly tripled to $0.85 per share. The stock tends to jump on impressive earnings reports, then decline over the next three months as investors are reminded of how tough the solar industry can be. And then the cycle starts again. Past performance is no guarantee of future results, but there's definitely a pattern going on here.
Best of all, SolarEdge is still a small-cap minnow in a very large sea. As long as the company can defend its unique market position over the long run while also scaling up its manufacturing and sales operations to match, there's plenty of runway for growth left to explore.
Anders Bylund has no position in any of the stocks mentioned. Leo Sun has no position in any of the stocks mentioned. Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Nvidia. The Motley Fool recommends NXP Semiconductors. The Motley Fool has a disclosure policy.