Growth stocks aren't getting the positive attention from investors that they were even a year ago, but that could offer a moment of opportunity. For investors with a healthy risk tolerance level, you needn't turn to the crypto markets to find investments with compelling paths to delivering favorable financial and shareholder returns.
Here are three such stocks with way more potential than any cryptocurrency that could enrich investors for the next decade and beyond.
1. Intuitive Surgical
Intuitive Surgical (ISRG 2.82%) has a simple yet compelling business model that has enabled it to put up stunning growth and deliver incredible returns to shareholders throughout the years. The company has more than doubled its annual revenue and earnings over the past 10 years alone, while delivering a total return to shareholders of about 371%. The company manufactures and sells surgical robotics systems, which are used in various minimally invasive surgeries.
It also sells services, software, accessories, and instruments key to the smooth functioning of these systems in surgical units of hospitals and other medical providers around the world. In short, Intuitive Surgical doesn't just generate revenue up front from the initial systems, but also ongoing revenue from the associated services and products these systems require. With its da Vinci surgical suite and Ion surgical system, it controls more than three-quarters of the entire surgical robotics market globally.
NASDAQ: ISRG
Key Data Points
Revenue and earnings growth has been less impressive in recent quarters due to unpredictable procedure volumes in markets with resurgent COVID-19. Revenue rose 11% in the third quarter to $1.6 billion, while its net income was down year over year but still totaled $324 million. But the company is profitable and steadily increasing its base of installed surgical systems around the world.
Intuitive Surgical's Q2 2022 revenue represented a nearly 50% increase from the same quarter in 2019, while its installed base of surgical systems rose roughly 40% on a three-year clip.
With plenty of growth opportunity still ahead as the prevalence of robotic surgical systems widens, Intuitive Surgical can continue to deliver strong financials and shareholder returns in the years ahead.
2. Teladoc
Teladoc (TDOC 1.46%) hasn't delivered the same level of growth lately that investors became accustomed to in the early days of the pandemic, but that doesn't mean the story is over for this company. Its leadership in the telehealth market should help it to generate favorable results and shareholder returns in the years ahead, even if apathy toward growth stocks has damped investor enthusiasm about the stock.
Recently, Teladoc's share price, and its bottom line, have suffered due to the nearly $10 billion in impairment charges it recorded in the first half of 2022. These eyebrow-raising writedowns were the result of overpaying for digital health-management company Livongo. Teladoc paid nearly $20 billion for Livongo in 2020.
However, it appears that the fog may finally be starting to lift for Teladoc, and investors could do well to take note. The company's third-quarter report showed a sharp deceleration in quarterly losses. Teladoc reported revenue of $611 million, an improvement of 17% from the year-ago period, and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $51 million.
Meanwhile, management just announced that it was raising its revenue forecast for the fourth quarter and full-year 2022. Nearly half of the company's 2022 revenue was expected to come from its fast-growing mental health business BetterHelp, which saw revenue grow 35% year over year in the third quarter of 2022.
NYSE: TDOC
Key Data Points
From chronic care to primary care to virtual counseling solutions, Teladoc's platform serves a broad range of consumers, while patients can receive access to quality care within the boundaries of their needs and physical location. With the rapid adoption of digital technologies, an aging population, and an increasingly distributed population in the age of remote and flex work, telehealth provides a convenient, accessible solution for people around the U.S. and the world.
This creates a golden long-term opportunity for Teladoc, as it continues to build market share and return to profitability. For long-term investors, now could be an excellent time to take a second look at this stock.
3. Innovative Industrial Properties
Innovative Industrial Properties (IIPR 0.63%) is an unexpected play on the marijuana market for investors who want exposure to this industry without taking on the risk of putting capital into a cannabis producer or distributor. The company operates as a real estate investment trust (REIT). It acquires and operates industrial facilities that it rents out under the triple net lease structure to state-licensed medical cannabis operators.
There are multiple benefits to the way that Innovative Industrial Properties is structured. For one, medical cannabis has been legalized in many more states than recreational cannabis, so this gives a certain risk hedge to its business. And its use of the triple net lease structure means that its tenants, rather than the REIT itself, are responsible for most of the costs of operating and maintaining the industrial structures, greenhouses, and other facilities that it owns. As of its most recent earnings report, Innovative Industrial Properties owned 111 properties totaling nearly 9 million square feet of rentable space in 19 U.S. states.
Because Innovative Industrial Properties is a REIT, it must pay out at least 90% of its taxable income to shareholders as dividends. Because the company has an enviable record of both top and bottom line growth, its payout to investors has grown in kind. Its dividend yields almost 7%, and the company recently announced a 24% sequential hike to its dividend for Q4 2022 to $7.10 per share, payable on Jan. 13.
NYSE: IIPR
Key Data Points
Over the past five years, Innovative Industrial Properties's revenue has grown by about 1,300%, while its earnings and funds from operations (FFO) have grown by about 1,500%. The stock has delivered a total return of more than 300% in that period.
Meanwhile, even as the broader cannabis industry struggles with near-term headwinds brought about by declining sales and sluggish legislation, the most recent quarter saw rent collection remain high, at 97%, with 100% of the company's operating portfolio of properties rented. The average lease length for Innovative Industrial Properties is 15.5 years.
For investors looking for a solid dividend payer in a fast-growing industry with a broad runway for growth still ahead, particularly as medical cannabis legislation expands, Innovative Industrial Properties looks like a no-brainer buy to consider for the long haul.
