It's something of a holy grail with investors -- the search for companies that can double your money. While that feat is impressive enough in its own right, it's even harder to find a growth stock that can return more than 100% in less than 12 months.
In 2019, the stock market delivered above-average returns, gaining nearly 29% over the course of the year. This, in turn, helped produce a bumper crop of triple-digit gainers. Among those were e-commerce platform Shopify (NYSE:SHOP), programmatic advertiser The Trade Desk (NASDAQ:TTD), and digital car seller Carvana (NYSE:CVNA).
Let's see what helped these stocks double in 2019 and why they continue to beat the market so far in 2020.
Image source: Getty Images.
Shopify: Up 187%
As the world increasingly turns to online shopping, a growing number of businesses have recognized the trend and made the shift to e-commerce. Shopify provides entrepreneurs with everything they need to sell their products and services online. The company has subscription plans that start as low as $29 per month and helps merchants build and maintain websites, process payments, manage inventory, and gain access to discounted shipping.
By empowering the next generation of online retailers, Shopify has dominated a lucrative niche. In 2019, revenue grew 47% year over year, though the company made the conscious decision to forego profits, instead investing heavily in its future growth. Shopify introduced its nascent fulfillment network last year, while also further expanding into international markets.
Fast-forward to 2020, and the outbreak of the COVID-19 pandemic and stay-at-home orders dried up retail foot traffic. At the same time, adoption of e-commerce -- which was already experiencing rapid growth -- accelerated. Shopify reported "handling Black Friday level traffic every day," as large swaths of brick-and-mortar retailers pivoted to online sales channels in order to stay afloat.
Shopify's first-quarter results kept pace with last year, with revenue up 47%, though profits remained elusive. Investors cheered the company's industry-leading position and the accelerating shift to e-commerce, driving the stock up 83% so far in 2020.
Image source: Getty Images.
Carvana: Up 181%
While it might be surprising to find a car dealer on the list, Carvana is no ordinary car dealer. It disrupted an outdated industry, moving used car sales from the showroom to the digital realm. Carvana is the leading e-commerce platform for buying and selling used cars, doing business in more than 160 markets across the U.S., and reaching 69% of the population. Customers can have the cars delivered on a flatbed, or via its network of 24 automated vending towers, and in so doing, Carvana is helping to consolidate an otherwise fractured marketplace.
In 2019, Carvana's revenue grew 101% year over year, marking the company's sixth consecutive year of triple-digit revenue growth. At the same time, the number of units sold soared 89%, and gross profit per unit (GPU) hit a new all-time high. The company continues to generate losses as it moves to gain additional market share, and with less than 0.5% of the nationwide used car market, Carvana has plenty of growth ahead.
Economic uncertainty caused by the coronavirus-induced bear market initially caused Carvana's stock to plummet this year, but the first-quarter results brought it roaring back. Revenue grew 45% year over year, while the number of retail units sold jumped 43%. Each unit sold was more profitable as GPU increased by nearly 10%. Net losses continued as Carvana continued to gain market share, but investors gave the profits a pass, as evidenced by the stock gaining 19% so far in 2020.
Image source: Getty Images.
The Trade Desk: Up 124%
Early last year, I named The Trade Desk my highest-conviction stock for 2019, and the company has certainly lived up to its promise. The digital advertiser is a leader in the fast-emerging field of programmatic advertising, which uses sophisticated algorithms and high-speed computers to match advertising inventory with the available slots, and places the ads in front of the customers most likely to act on them. This has been a lucrative niche for The Trade Desk, growing at nearly 10 times the rate of the overall ad industry and stealing market share from competitors.
Revenue grew 39% year over year in 2019, an impressive feat, considering the 55% growth it achieved in 2018. The Trade Desk also increased its profitability, with net income up 23%. The company's omni-channel strategy continued to bear fruit, as mobile video spending grew 50% year over year, while mobile in-app grew 67%. The most explosive results came from the connected TV and audio markets, which grew 137% and 185%, respectively.
When the bear market reared its ugly head in 2020, fears about slashed advertising budgets initially hammered the stock, but with marketers looking for the most bang for their buck, The Trade Desk quickly rebounded. Revenue increased 33% year over year in the first quarter, while net income soared 136%. This reassured investors that the best was yet to come, driving the stock up 38% so far in 2020.
The fine print
Investors are no doubt aware of the old adage that past performance doesn't guarantee future results. Additionally, two of the companies -- Shopify and Carvana -- continue to forego profits in lieu of positioning themselves for future growth. Then there's the matter of nosebleed valuations. Shopify, Carvana, and The Trade Desk have price-to-sales ratios of 69, 14, and 30, respectively, while many investors consider a reasonable measure to be between one and two -- so they're by no means cheap using traditional valuation metrics.
That hasn't stopped these stocks from being top performers in 2019, and with the way things are going, they're liable to be market-beaters again in 2020.
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