Identifying companies that have sustainable competitive advantages and highly scalable business models is a recipe for investing success. Backing promising companies at early growth stages can lead to huge returns if you take a long-term approach. Just look at Amazon, Netflix, and NVIDIA, for example. A well-timed investment in each of these companies could have turned a $3,000 investment into $1 million or more.
Most investments won't come close to matching that kind of grand-slam performance, but there are still undervalued companies on the market that have the potential to deliver great returns for shareholders.
Read on for a look at three promising tech companies that have the potential to turn a $3,000 investment into much, much more.
Image source: Getty Images.
1. Impinj
If you were to take a survey of corporate goals for 2021, the term "digital transformation" is something that would probably pop up a lot. The Information Age is reshaping the way the world does business, and access to valuable data is becoming a differentiating factor between success and failure across industries.
Impinj (PI 3.73%) is a small-cap company that's valued at roughly $1.2 billion, and it's at the forefront of bringing non-electronic items into the world of networked data. The company develops radio-frequency-identification (RFID) tags, sensors, and software. Emerging use cases for these technologies over the next decade and beyond could supercharge the business.
Retailers are already using Impinj's solutions to improve the speed at which they're able to take inventory and the depth of information they're able to track. Impinj's RFID tags are also being used to monitor manufacturing, supply chain processes, and the safety of mechanical parts.
In short, the company's hardware and software can be used to keep better track of things that wouldn't otherwise be storing and transmitting data. It's an intriguing niche that has big promise. Impinj is working to expand the world of connected objects far beyond computers and mobile devices, and it looks well positioned to capitalize on momentum for digital enterprise transformations and Internet of Things trends.
2. Ubisoft
Ubisoft (UBSFY +1.25%) is a France-based video game publisher that owns a collection of popular franchises, including Assassin's Creed, Rainbow Six, and Ghost Recon. The company has a strong collection of development studios and decades of experience marketing new titles, and it's on track to benefit from rising demand for interactive entertainment.
The global gaming industry is still relatively young despite impressive growth over the last decade, and Ubisoft stands out as a particularly intriguing play because of its reasonable valuation and underappreciated growth opportunities. With a market capitalization of roughly $12.3 billion and shares trading at roughly four times the midpoint of what will likely prove to be conservative sales guidance and 20 times this year's expected operating income, Ubisoft could be primed for a breakout.
The publisher should benefit from ongoing growth for digital distribution and in-game economies in the console and PC markets, and it's likely just begun to tap into opportunities in mobile. Like other major publishers, Ubisoft still has huge room for growth on smartphone and tablet platforms.
Activision Blizzard has scored big wins by bringing Call of Duty to mobile, and Ubisoft has likely seen strong performance for its rival's hot franchise and accelerated its own efforts in the space. Properties including Rainbow Six and Ghost Recon have natural room for growth on mobile, and Ubisoft also has other franchises that are well-suited for the fast-growing casual-gaming audience.
More people around the globe take up gaming as a hobby every day, and Ubisoft stands out as an undervalued player that will continue to shape the industry.
3. Zuora
In 2016, the World Economic Forum published an article outlining eight predictions for the year 2030. The first prediction detailed was that all products would have become services. That prediction may prove to be overly aggressive, but it's not hard to see why it could be within the realm of possibility.
The subscription economy is poised for huge growth, and Zuora (ZUO +0.00%) looks particularly well-positioned to capitalize. The software-as-a-service (SaaS) company provides a highly customizable platform for implementing and growing subscription-based businesses. Trading at roughly 5.8 times this year's expected sales and sporting a market capitalization of roughly $1.75 billion, the company also looks cheaply valued.
While many software companies enjoyed accelerated growth amid conditions created by the coronavirus pandemic, the associated economic uncertainty meant that many large enterprises delayed potential shifts to subscription-based operations. That resulted in Zuora having a harder time bringing new customers on board its platform.
However, investors should view the challenges facing the business over the last year as a setback rather than a derailing of the company's long-term growth outlook. The stock trades at a discount because of recent setbacks, but there's a good chance that its current share price will come to look very cheap with the passage of time.
