One of the biggest risks involved with investing in smaller companies is that they sometimes have a highly concentrated source of revenue. Until recently, TurboChef
Yet there's opportunity available there, as well. Both Starbucks
Subway has become a decreasing component of overall revenue for the oven maker. Where the sandwich chain represented nearly a third of sales last year, it accounted for only 12% of TurboChef's revenue this past quarter.
There's obviously lots of opportunity for food-service companies to offer hot cooked foods that don't taste like they just popped out of a microwave oven. The difference is in TurboChef's technology, which combines microwaves, convection, and something called "air impingement" technology. Sales rose 140% over last year and 41% over the second quarter, while gross margins rose to 40%, reflecting those higher sales volumes.
The trend of using these new warming technologies has been growing. In fact, our Motley Fool Hidden Gems recommendation Middleby
The competition may not be sitting idly by, letting TurboChef steal potential customers, but the oven maker isn't waiting, either. It launched a new partnership with Sara Lee
A developing company has got to start somewhere, and having just a handful of customers is not as critical if it's growing its client base along the way. TurboChef is building a brand -- and it's beginning to look like one that may bring warm, toasty returns.
Warm up to TurboChef with these related Foolish articles:
Middleby is a Hidden Gems recommendation. Starbucks is a Stock Advisor pick. Cook up some market-beating returns with any of our investment services free for 30 days.