3 High-Growth Stocks That Are Just Getting Started

The coronavirus pandemic has had disastrous effects on people, businesses, communities, and the economy. As a result, many stocks are trading at a discount to previous highs, but three stand out as high-quality growth companies with a long runway ahead. Latin American e-commerce operator Mercado Libre (MELI 2.10%), entrepreneur e-commerce platform Shopify (SHOP 5.57%), and data analytics software specialist Alteryx (AYX) are three that deserve some attention from growth investors.

Let's take a quick look at some of the key metrics around this trio and dive into what makes each stock worth owning today.

Numbers highlight an opportunity for investors 

All three capped off a solid 2019 and are looking toward another great year ahead. Even though shares trade at 28% or more of a discount off the 52-week highs (as of market close Tuesday, March 24), the price-to-sales ratios are still pretty lofty and will scare away the value-minded investor. But growth investors know that often these special companies are worth the market premiums.

*Note: Analysts' estimate. MRQ=Most Recent Quarter. Share price calculations based on Tuesday, March 24, market close. Data source: Yahoo Finance and company news releases.

Even though 2020 projected growth numbers are lower than the most recent quarterly figures, there are reasons why each of these could beat these estimates.

1. Mercado Libre: More than just an e-commerce company

Mercado Libre has built its multibillion-dollar run rate business by focusing on the Latin American market, where e-commerce is still in its infancy. An eMarketer report from June 2019 indicated that online sales were projected to make up a tiny 4.2% of all retail sales last year.

But the company isn't just an e-commerce website. It's made up of six complementary businesses, including shipping and payments. Its payments system has become the highlight of its earnings reports and a huge source of growth both on its e-commerce platform and "off-platform" at local shops and restaurants. Last year, total payment volume exceeded $28 billion, which drove its non-marketplace revenue to $1.1 billion, an increase of 49% over the previous year. This trend is expected to continue for 2020, and these revenues will surpass its core marketplace revenues for the first time in its history.

Image source: Getty Images.

Any disruption from coronavirus will likely be a speed bump on the way to a much bigger company five and 10 years from now. 

2. Shopify: Helping entrepreneurs sell products online

It all started when the company's co-founder, Tobias Lutke, was looking to start an online snowboard store. He couldn't find any off-the-shelf software to power his website, so he built his own from scratch. The online snowboard store eventually closed and the founders focused solely on expanding the platform to serve other entrepreneurs. Shopify's software was first released to customers in 2006.

Since then it has grown to serve more than a million customers in 175 countries around the world. It invests its profits to make its software better, add new functionality, and even create a fulfillment network to make it easier for its customers to run their online stores. 

Most of the company's revenue (64%) comes from its merchant solutions segment, which takes a small fee for services that merchants use to run their stores. This segment aligns the company's success with merchant success. As merchants sell more, ship more, or utilize Shopify Capital to help grow their businesses, it benefits alongside its merchants.

The addressable market is estimated at $78 billion but the e-commerce platform only captured about 2% of what's possible, giving it plenty of room to grow for years to come.

3. Alteryx: Solving problems for data analysts

Data analysts spend much of their time manipulating and cleaning data rather than doing high-value analysis activities they enjoy and are paid for. Alteryx's tools help reduce this wasted time. The company provides an easy-to-use code-free drag-and-drop software platform that appeals to spreadsheet lovers and a more powerful tool for those data scientists who prefer advanced analytic models and coding to manipulate data. 

New customers grew 30% year-over-year, and existing customers spent 30% more than they did the previous year. The company has a history of capturing more revenue from existing customers, as its dollar-based-net-expansion numbers have exceeded 125% for the last 12 quarters. This high gross margin business has allowed the company to invest heavily in growth but still post an 18% non-GAAP operating margin for 2019.

With an estimated 47 million spreadsheet users across the globe and a solid competitive edge, the company is just getting started tackling its $73 billion addressable market.

The bottom line for investors

Often valuation ratios for growth companies look expensive for years, and these three are no exception. But with strong business models that will thrive no matter the length of the coronavirus shelter-in-place orders and shares trading at a relative discount to previous highs, it seems a good time to add these powerhouses to the growth investor's portfolio. But I'm not just a pitchman for these stocks; I'm a shareholder too. These three stocks make up more than 26% of my family's investment portfolio.