High-growth and long-lasting business are almost a contradiction in terms. The faster they grow, the harder they fall. But what if you could find companies that actually combine heady growth rates with strong business models for the long term?
To find a few of these rare long-lasting growth tickers, we asked a few Motley Fool investors to share their best ideas. As it happens, all of them came back with companies from the networking industry. Read on to see why our panelists recommend buying and holding Palo Alto Networks (NYSE: PANW), ARRIS International (NASDAQ: ARRS), and Cisco Systems (NASDAQ: CSCO) for the long run.
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Imagine modern life without it
Chuck Saletta (Cisco Systems): Perhaps no company is more core to our modern, connected way of life than networking-titan Cisco Systems. By far the largest networking company in the world with about a 60% global share, Cisco Systems operates not just the networks, but much of the related connectivity technology that runs on it. That includes firewalls, cloud infrastructure, video conferencing, web-enabled meetings, IP telephony, analytics engines, security management, and more.
Now that internet connectivity is available virtually everywhere in the world, Cisco Systems' massive growth from that initial onslaught of buildout has subsided. Still, between the need to upgrade infrastructure to handle continued internet traffic growth and the revenues from all its other products, the company still has a solid growth trajectory ahead.
Perhaps even better for investors, Cisco Systems' growth is available at a relatively modest price. Trading, as it does, at just above 15 times its expected forward earnings, the company's shares can practically be considered a bargain. Add to that a projected earnings growth of a bit above 9% annualized over the next five years, and you've got a reasonable anticipated growth trajectory available at a reasonable price.
There are few companies with both the product breadth and installed base of Cisco Systems, which gives it incredible current name recognition and the potential for strong cross-selling among current customers for a long time to come. That provides reason to believe Cisco's growth story may be around not just today and tomorrow, but for a long time to come.
Image source: Getty Images.
The next-gen firewall leader
Leo Sun (Palo Alto Networks): The surge in data breaches over the past few years is bad news for companies and consumers, but great news for cybersecurity companies like Palo Alto Networks. Palo Alto provides next-gen firewalls for over 45,000 customers in more than 150 countries. That customer base includes over 85 of the Fortune 100 companies and more than 63% of the Global 2000.