This year will soon be history, which makes this a good time to look back at 2019's best-performing stocks in various categories.
A host of big-name companies went public during the year, including Uber and Pinterest in the technology sector. Neither of these stocks, however, makes the cut as one of 2019's best-performing tech initial public offerings (IPOs) that have market caps of at least $2 billion. That distinction (at least through Dec. 16) goes to Progyny (PGNY -1.42%) -- which some classify as a tech stock, though it also could be considered a healthcare stock -- and Zoom Video Communications (ZM 1.57%).
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2 top tech IPOs of 2019
| Company | Industry | Market Cap | IPO Date | IPO price | Return Since IPO |
|---|---|---|---|---|---|
| Progyny | Healthcare information services | $2 billion | Oct. 25 | $13 | 91.6% |
| Zoom Video Communications | Application software | $18 billion | April 18 | $36 | 84.3% |
Data source: finviz.com. YTD = year-to-date. Data to Dec. 16
Progyny
Progyny bills itself as a "leading benefits management company specializing in fertility and family-building benefits solutions in the United States." It's the only publicly traded company that specializes in its niche, to my knowledge.
On Dec. 4, the company reported its first quarterly results as a public company. In the third quarter, revenue soared 120% year over year to $61.2 million. Growth was primarily driven by its fertility benefit services segment, whose revenue surged 90% to $50 million (though its newer pharmacy benefit services also contributed, with its revenue coming in at $11.2 million, versus just $1.4 million in the year-ago period).
Excluding charges taken in connection with its IPO and the conversion of all outstanding shares of convertible preferred stock into common stock, Progyny's net income was $3.0 million, or $0.03 per share. That was better than the $0.02 Wall Street consensus estimate and up from a net loss of $1.1 million, or $0.20 per share, in the year-ago period.
Analysts are looking for Progyny's earnings per share to grow at a sizzling average annual rate of 161% over the next five years. Shares are trading at 80.4 times expected forward earnings -- pricey on an absolute basis, but not unreasonable if you take the estimated growth rate into consideration. That said, the estimated future earnings growth is just that: estimated.
Zoom Video Communications
Zoom is a unified communications-as-a-service (UCaaS) company whose platform brings together cloud-based videoconferencing, online meetings, messaging, and a conference room solution. It also began rolling out its Zoom Phone in early 2019.
In the recently reported third quarter, the company's revenue rocketed 85% year over year to $166.6 million, zooming by the $156 million Wall Street consensus estimate. Growth was driven by the addition of new customers and the expansion of services provided to existing customers. Indeed, existing customers apparently are very happy with the company's services, as reflected by its 130% trailing-12-month net dollar expansion rate for customers with more than 10 employees. That means, on average, these customers spent 30% more on Zoom's services over the last year than they did in the previous year.
One major thing separates Zoom from many of 2019's tech IPOs: It's profitable. In the third quarter, its net income was $2.2 million, or $0.01 per share, up from a net loss of $0.6 million, or $0.01 per share, in the year-ago quarter. Adjusted for one-time items, net income came in at $25.2 million, or $0.09 per share, up from $2.1 million, or $0.01 per share, in the year-ago quarter. This adjusted EPS result was triple the $0.03 that analysts had been expecting.
Wall Street is modeling for Zoom to grow EPS at a torrid average annual pace of 162% over the next five years. As you would expect, the stock's valuation is sky-high: It's trading at 229 times the forward consensus earnings estimate. But that's not obscene when you consider the projected earnings growth rate.
