You could be missing out on great money-making stock picks because it's hard to keep tabs on every company in every industry. Don't worry. We're here to help. We asked three of our favorite Motley Fool contributors to dig into their universe of ideas to find stocks many investors might not know about. Their recommendations? Three intriguing companies that are bringing e-commerce to Africa, riding the wave of renewable energy, and allowing companies to dig deeper into their data. Read on to discover if Jumia Technologies(NYSE: JMIA), Vivint Solar(NYSE: VSLR), and Alteryx(NYSE: AYX) are right for your portfolio.
The next "The Amazon of..." company that may end up being more
Tyler Crowe (Jumia Technologies): Around the world, companies are jockeying to become "The Amazon of [insert location]". We've seen some do pretty good impersonations or carve out their own identities, like Alibaba and MercadoLibre. One recent IPO is looking to get the title "The Amazon of Africa." That's Jumia Technologies. Jumia's ambitions on the continent are great, and the challenges facing it are numerous. But the company is showing some of the early signs that it could one day find itself among those other online retail titans.
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Perhaps the greatest challenge facing Jumia is the same one that faced so many internet commerce companies in the U.S. 20 years ago: getting customers to trust enough to make their first online purchase. So far the results are promising. Customers who made their first purchase three years ago now have increased their purchase frequency and total spend rates by 35% and 67%, respectively.
What's more, Jumia is running circles around the competition when it comes to capturing market share in online transactions. In the 14 countries where Jumia currently operates, 78% of online shoppers have made a purchase on its platform, and of those customers, 88% have made multiple purchases. There is no other pan-African retailer with that kind of market capture or brand recognition.
One of the critiques I have of Jumia as it stands today is that it's trying to do too many things all at once. Not only is it looking to become the Amazon of Africa, but its offerings for food, travel, entertainment, and online payments suggest it's also trying to be the Postmates, Booking Holdings, PayPal, and Ticketmaster of Africa. Jumia does have better name recognition than most American companies, so it can leverage trust in its brand into anything that involves an online transaction. Trying to execute well across all these verticals, though, will be daunting and could result in a multitude of mediocre services instead of a few great ones.
With a booming population, a burgeoning middle class, and a nascent e-commerce industry across all of the continent, Jumia has a growth opportunity in front of it that few other companies could imagine. What matters is capturing that opportunity.
Slow and steady solar growth
Travis Hoium (Vivint Solar): The residential solar industry isn't the growth industry it once was from an installation standpoint, but that doesn't mean companies like Vivint Solar aren't growth stocks. The company's installations have stagnated at about 45 megawatts (MW) per quarter, but its lease/power purchase agreement model means every new installation grows long-term revenue.
You can see below that revenue has increased significantly since Vivint Solar went public, and the trend will continue as new installations are added to the portfolio.
The best way to gauge Vivint Solar's growth is by looking at gross contracted retained value, which is the present value of all future cash flows from customers. At the end of the first quarter of 2019, the retained value on the balance sheet was $1.55 billion, up from $1.35 billion a year ago and $1.13 billion in Q1 2017.
Vivint Solar is now the second-biggest solar installer in the U.S., and it's growing into new states like Florida and Texas where the industry has great potential. It's a tough business pushing solar to homeowners, but Vivint Solar has proven it can do so and add significant retained value to the balance sheet in the process. As these systems stack up, the company will grow, which is why I think this is a stealth growth stock for energy investors.
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Making sense of data is a huge opportunity
Todd Campbell (Alteryx): A data science company, Alteryx allows businesses to make better decisions by mining information from disparate databases and then making it easier to manipulate that data for insight. Just about any business can benefit from its tools. For instance, transportation companies can use it to improve decisions related to fuel hedging, and drugmakers can use it to manage clinical trials better.
Initially companies usually deploy Alteryx tools for specific projects. However, a dollar-based net expansion rate (sales at existing clients relative to one year ago) of 133% in Q2 2018 suggests that once Alteryx's foot is in the door, it wins more widespread adoption. In fact, its lowest net expansion rate over the past 10 quarters is an impressive 129%.
Expanding sales at current customers and a 34% year-over-year increase in client count to 5,278 translated into sales of $82 million in Q2, up 59% from the same quarter last year. Alteryx's also turned the corner to profitability. Its latest guidance is for adjusted earnings per share of at least $0.44 on sales of $370 million to $375 million this year. If it delivers on its top-line target, it would represent revenue growth of 46% to 48% from last year.
Since Alteryx's addressable market is nearly $50 billion according to IDC and management is targeting a long-term operating margin of at least 35%, up from 19% in 2018, there's plenty of room for earnings upside, making this a great technology stock for in-the-know investors to consider buying.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Todd Campbell owns shares of Alteryx and Amazon. His clients may have positions in the companies mentioned. Travis Hoium has no position in any of the stocks mentioned. Tyler Crowe owns shares of Jumia Technologies AG-ADR. The Motley Fool owns shares of and recommends Alteryx, Amazon, and MercadoLibre. The Motley Fool has a disclosure policy.
