It's a dog-eat-dog world out there, and small companies can have a tough time gaining traction. Some small enterprises are forever destined to stay small, while others run out of cash and fold entirely. Then there are those select few that find a winning strategy and are destined for greatness. Investors who get in early and stick with those winners often see life-changing returns on their money.
Three companies that are on just such a winning streak are The Trade Desk (NASDAQ: TTD) , Tucows (NASDAQ: TCX) , and Invitae (NYSE: NVTA) . Here's why three of our Foolish contributors think these companies are just getting started.
Advertising optimization optimized for investors
Nicholas Rossolillo (The Trade Desk): Shares of internet advertising-optimization platform The Trade Desk are up a sizzling 146% in the last 12-month stretch. So how is the company "just getting started?"
For one thing, the company has a market cap of just $8.8 billion as of this writing -- a tiny enterprise in comparison to internet ad leaders Facebook ($529 billion) and Google parent Alphabet ($810 billion). Plus, now could be an ideal time for investors looking for high-growth companies to jump aboard The Trade Desk bandwagon.
First-quarter 2019 revenues grew 41%, to $121 million, a slowdown from the 61% rate posted the same period a year ago, but still a more-than-respectable trajectory. Better still was the 44% increase in adjusted earnings, a figure that will only continue to get better as The Trade Desk piles cash back into operations to promote growth on its advertising purchasing-optimization platform.
Though The Trade Desk is up against sizable competition, the company has been targeting online ads outside of the "walled gardens" that are Facebook and Google. That includes selling data to help businesses make better marketing decisions, a small segment of The Trade Desk's overall business right now but a fast-growing and promising segment. Connected TV is also a key area of focus, as advertisers try to find effective ways to get their message in front of households that have cut ties with their cable providers.
Granted, the stock isn't cheap by any measure, which can cause some wild ups-and-downs: One-year forward price to earnings is currently at 54.7 as of this writing. But the company is in the beginning stages of reaching profitable scale and its revenues are still well into the double digits. That could mean that many more years of stock appreciation lie ahead.
Image source: Getty Images.
The Ting parent is affordable for all the wrong reasons
Anders Bylund (Tucows): This Canadian provider of domain name and internet connectivity services is no spring chicken. The company has been around since the early days of the internet, but its business model crystallized more recently into a sustainable growth engine.
Tucows has been growing its sales by an annual average of 22% over the last five years, driving earnings 38% higher on an annual basis over the same period. Part of that growth came from new business plans finding traction on their own, such as the Ting Mobile cellphone network and Ting Internet fiber-based broadband service.
At the same time, Tucows has been snapping up some growth by acquisition. Recent deals include a complete buyout of domain-name specialist eNom and two separate batches of domain-name customers from sector-giant GoDaddy .
The company is expanding its Ting-branded services into more and larger markets, supporting that effort with a new data center in Colorado. These expansion efforts are not cheap, but you have to spend money now to make money later.
"We will be incurring operating expenses for our data center strategy in 2019 as well," said CEO Elliot Noss in February's fourth-quarter earnings call . "It is another of the many small places that we trade short-term profitability for longer-term greater returns."
Market makers often shrug off long-term growth plans to focus on more immediate shortcomings, and that's the case with Tucows and its lower earnings targets at the moment. The stock has plunged 28% lower in the last month alone, trading essentially sideways in a 52-week perspective.
You can pick up Tucows shares at a very reasonable 21 times forward earnings estimates today. I think we're looking at a fantastic growth story for the long haul, so this myopic discount could serve as a fine buying window.
An addressable market of everybody
Todd Campbell (Invitae): It's not hard to imagine everybody knowing their genetic profile in the future. Genomics are already influencing drug development and treatment decisions, and falling costs are making DNA screening increasingly affordable. If we're on the cusp of our genetic make-up being as commonly known as our blood type, then Invitae's future could be especially bright.
Invitae's already generating significant revenue growth because of demand for its gene-screening tests in prenatal, neonatal, oncology, and drug research markets. Its sales more than doubled in 2018, and in the first quarter, revenue jumped 46.5% year over year, to $40.5 million. As a result, management says it's on track to deliver revenue of $220 million this year, up from $148 million in 2018. Next year, the company expects revenue could reach $500 million.
Invitae isn't profitable yet, and management's focus on lowering prices to boost volume means that won't change anytime soon. Regardless, the long-term potential for this company is potentially huge, given that its addressable market opportunity is, ultimately, everyone.
10 stocks we like better than Tucows
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Anders Bylund owns shares of Alphabet (A shares). Nicholas Rossolillo and his clients own shares of Alphabet (C shares) and Facebook. Todd Campbell owns shares of Alphabet (C shares), Facebook, Invitae, and The Trade Desk. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Facebook, The Trade Desk, and Tucows. The Motley Fool recommends GoDaddy. The Motley Fool has a disclosure policy .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of NASDAQ, Inc.