The S&P 500 has gained 34% over the last three years, but no matter how well the market has performed, there are always other stocks that have performed much better.
Burlington Stores (BURL -0.40%), Logitech International (LOGI -0.99%), and Advanced Micro Devices (AMD -5.44%) have more than tripled (in one case, by much more) since August 2015. Let's see how they did it and what the future might hold for these companies.
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Who said retail is dead?
It's been a rough ride for retailers in recent years as customers migrated to online shopping and shied away from pricier department store merchandise. Several retailers have been forced to declare bankruptcy as a result of these trends.
Even so, Burlington Stores has performed phenomenally well for shareholders. Its focus on brand-name merchandise at value prices, combined with superb inventory management, has been a winning combination. As a result of this strategy, Burlington stock has climbed 207% over the past three years.
Burlington buys preseason and in-season merchandise, which allows the company to respond in a timely manner to changes in fashion tastes. This strategy has helped Burlington avoid the fashion missteps that sometimes get other clothing retailers into trouble. The result has been comparable-store sales growth in each of the last five years, ranging from 2.1% to 4.9%.
In addition, Burlington has expanded its margins every year since fiscal 2013, as a result of management's laser focus on minimizing markdowns and increasing inventory turnover. Sales have increased 23% over the last three years, while costs and expenses have increased at only 19%. Because of that cost discipline, Burlington has been able to turn a net loss in fiscal 2013 into diluted earnings per share of $5.98 over the trailing 12 months. No wonder the stock has tripled.
Looking ahead, management sees an opportunity to nearly double its base to 1,000 stores. The company is also expanding into other categories, such as home and beauty, to create more-sustainable growth over the long term. All in all, Burlington is still very much on the move.
Gamers love Logitech
The video game industry has brought many rewards for computer peripheral maker Logitech. The rising popularity of esports, video game streaming, and the release of Fortnite -- which has gone viral in the gaming community -- have caused demand for gaming mice and keyboards to shoot higher.
Gaming peripherals (which make up 21% of trailing 12-month revenue) have been Logitech's fastest growing segment in recent years. In the last quarter, the gaming segment soared 75% year over year, which helped drive a 15% increase in total revenue.
Under CEO Bracken Darrell, Logitech has found a renewed focus on product design, innovation, and cost discipline, which has led to EPS nearly tripling over the last five years to $1.25, sending the stock price up in proportion.
Management sees the growth trend in gaming as a "generational change." If that turns out to be the case, expect Logitech to deliver more gains over time.
AMD responds in a big way
For years, AMD has played second fiddle in the market for central processing units (CPUs) and graphics cards. That's because Intel and NVIDIA historically have dominated those respective markets. But under CEO Lisa Su, AMD has been making a big comeback, which has fueled a blistering 970% rise in the stock price over the last three years.
AMD's new Radeon graphics cards and Ryzen processors have seen a strong response in the market, allowing the company to take market share from both Intel and NVIDIA. As with Logitech, AMD has benefited from the surging popularity of new game releases, which has driven strong sales for its Radeon RX 500 and Vega series graphics cards. AMD is also seeing healthy demand from the data center market, as well as from cryptocurrency miners.
The company estimated that crypto demand generated about 10% of revenue in the first quarter of this year, although that demand tapered off somewhat in the second quarter. Investors should expect AMD to depend more on gaming and data center demand to drive growth over the long term, as crypto demand can be volatile.
While revenue was up an impressive 53% year over year in the second quarter, higher margins turned a year-ago loss into a profit of $0.14 per share -- AMD's highest quarterly profit in seven years. Long term, management has guided for double-digit revenue growth of more than $0.75 in EPS, which means AMD may still have some legs with its comeback.
Two ways to find the elusive three-bagger
It can be difficult to find stocks that triple in three years, but the stocks discussed above show a few different ways to find your next three-bagger. Sometimes operational efficiencies alone can be enough (Burlington Stores) to fuel rapid earnings growth. In the case of AMD and Logitech, sometimes expanding market opportunities can bring unexpected growth leading to big gains for shareholders. Happy hunting!
