Archer Aviation (ACHR 2.40%) is getting a lot of attention from investors lately. The maker of electric takeoff and landing vehicles (eVTOL) doesn't have any measurable revenue currently, but it has big ambitions. It has forged deals with a number of airlines as it aims to build urban air taxi networks in metro areas around the world.
However, some obstacles are keeping the company from taking this idea mainstream. It's selling its Midnight eVTOL for $5 million. At that price, the payback period is much longer than for the Uber Technologies' vehicles that it's competing with, making the unit economics questionable.
Archer believes that its vehicles can deliver significant time savings for trips to the airport. That may be true, but they only hold four passengers, so their capacity is no more efficient than a conventional ride-sharing vehicle. Nonetheless, investors are bullish on Archer Aviation as the stock currently has a market cap of $5.5 billion.
Given the challenges Archer faces, some investors might wonder if there are similar stocks with an easier path to outsized performance. I can think of several stocks that look poised to top Archer in the next few years. Let's take a closer look at two of them.
Image source: Getty Images.
1. Innodata
Innodata (INOD 5.50%) is a small-cap stock with significant exposure to the artificial intelligence (AI) boom. The company does what's sometimes called data labeling or data engineering. It prepares data to be used to train AI models, like large language models. Ensuring that training data is high quality is crucial for the success of these models.
That positioning has sent the company's growth rate soaring. In the first quarter, revenue rose 120% to $58.3 million. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose from $3.8 million to $12.7 million.
Management said onboarding by "potential major new customers" helped drive its growth. The company is also a competitor of Scale AI, which was valued at $29 billion after Meta Platforms took a 49% stake in it.
Innodata currently has a market cap of $1.6 billion, so it would have to gain more than 200% to reach $5.5 billion in market cap. However, the company looks poised for a breakout, as it's gaining business from a number of large customers, including a top enterprise technology, a leading cloud software company, and a large tech conglomerate.
The company was conservative with its guidance, calling for 40% full-year growth, but it could easily beat that. If it does, the stock could move significantly higher.
2. Green Brick Partners
It's been a tough time for homebuilders, as the housing market has been ice cold due to elevated mortgage rates and the lock-in effect from rock-bottom rates during the pandemic. However, Green Brick Partners (GRBK 0.80%) continues to deliver solid results even with those headwinds. In the first quarter, the company reported 11% revenue growth to $497.6 million, a gross margin of 31.2%, and net income of $75 million, or a 15% profit margin.
Green Brick has differentiated itself in the industry by owning and developing lots rather than using an asset-light model, and focusing on desirable, high-growth markets with higher prices. Its biggest markets are Dallas and Atlanta, two fast-growing population centers. The company also has a low debt-to-capital ratio, meaning it can survive a sustained downturn and can leverage up to take advantage of any opportunities that come up.
The stock trades up more than 400% over the last five years and trades at a price-to-earnings ratio of just 7. Housing demand is likely to improve over the next three years, and Green Brick is poised to capitalize on that.
Even without a recovery, the company's valuation and margins give it significant upside potential. With a double in market cap, the stock would essentially be where Archer Aviation is today. It should be able to get there based on its momentum and execution, as well as a likely improvement in the housing market.
