High-growth companies can result in multibagger returns for investors, but not every fast-growing company deserves a spot in your portfolio. Companies are constantly innovating, and there's no guarantee that today's winners will be winners tomorrow, too. To help you find the best growth stocks, we asked three Motley Fool contributors to scour their universe. Here's why they think now is a great time to add Anaplan (PLAN), Teladoc (TDOC 3.31%), and Tableau Software (DATA) to your investment accounts.
Plan ahead for profits
Todd Campbell (Anaplan): It's common for shares in companies recently gone public, such as Anaplan, to swoon after the lock-up period associated with initial public offerings (IPO) expires. Worry that insiders will unload shares, forcing prices lower, often sends investors to the sidelines.
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However, lock-up induced sell-offs can create a good opportunity to buy young companies on sale, and for this reason, it could be a perfect time to consider adding Anaplan to portfolios.
Anaplan's share price fell over 10% ahead of its lock-up expiration on April 10, and although shares are starting to make their way higher again, prices are still trading at a nice discount to their $41 peak earlier this year.
Anaplan's software helps more than 1,100 customers see the real-time impact of possible business changes, providing greater insight to decision-makers tasked with planning and budgeting. Its solution is resonating with clients and prospects. Revenue grew 43% year over year to $241 million in fiscal 2019, which ended on Jan. 31, because of growing use at existing customers and new accounts. Anaplan's net expansion rate, a measure of current sales to past sales at customers, has been above 120% in each of the past three years.
Anaplan's CEO and CFO are both finance pros, so there's good reason to think that their knowledge of their target market will help them capture an increasingly larger share of an addressable market valued at about $20 billion annually. Given the company's success so far and the opportunity ahead, using the post-lock-up swoon as a chance to add this stock to growth portfolios could be smart.
The leader in remote healthcare
Nicholas Rossolillo (Teladoc): Remote healthcare -- consulting with a health professional via phone or online -- is beginning to look like the future of medicine. And although the virtual industry is still a small percentage of how the world gets medical assistance, one company has emerged as the leader: Teladoc. By way of innovating new remote health services and acquiring its peers, the company is now the largest virtual care provider with plenty more room for further growth around the globe.
In 2018, Teladoc's organic revenue excluding acquisitions increased 36% to $417.9 million, and adjusted EBITDA was positive $13.4 million compared with a $12.5 million loss in 2017. In the year ahead, management is calling for at least another 28% increase in revenue and adjusted EBITDA in the $25 million to $35 million range. As of this writing, the stock is up over 20% over the last 12 months.
Why consider Teladoc now? Teladoc is turning its attention to the vast international markets and innovating new services. The company announced it is purchasing France's leading telemedicine provider MedecinDirect for an undisclosed sum, and it's also launching Canada's first remote health service. Back here in the states, Teladoc announced a partnership with Cincinnati Children's Hospital to develop the industry's first pediatric remote health service.
The more intriguing reason the stock is worth a look now, though, is simply that shares have fallen sharply as of late. Investors were spooked by the company's 2019 outlook -- implying a slowdown in growth from the recent past. Though the stock is still up year over year by double-digits, it is nearly 70% off its all-time high reached during the fall of 2018.
Such wild swings are usual for a company like Teladoc, which isn't yet profitable on an unadjusted basis. However, it's all about growth now and profits later, so big pullbacks can be a great opportunity for long-term investors to pick up some shares while they're down. As an active disruptor in the healthcare space, it's worth considering a purchase of this fast-growing leader in tech-driven medical services.
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This data-driven stock is trading at a 16% discount
Anders Bylund (Tableau Software): This maker of data analytics software and services has seen share prices plunging 11% lower over the last month. In 2019 as a whole, the stock is trading sideways and missing out on a 16% gain in the broader market. That's despite a fantastic earnings report in February and a groundswell of bullish analyst reviews leading into next month's first-quarter update.
To be honest, I see no reason Tableau's shares should be lagging right now. Sure, the company is knee-deep in a strategy shift away from perpetual software licenses and into repeatable service subscriptions, but that's already a well-known story around the software industry. Revenue rose 35% year over year in the fourth quarter, and Tableau reports positive adjusted earnings in a reliable way. Monthly subscriptions accounted for 80% of that quarter's total sales, indicating that the rockiest part of the transition is behind us.
Despite the recent slowdown, Tableau investors have pocketed a 140% gain over the last three years, while trailing revenue increased by 53%. Data analytics remains a hot market, and Tableau is a proven leader in that field. If Tableau's long-term rise comes to an end any time soon, I would expect it to be at the target end of a buyout. Whether or not the acquisition-based exit is in the cards, investors buying in at today's prices should be happy in the long run. Snapping up some shares before the next earnings report in two weeks makes a lot of sense.
