3 Stocks That Could Make You Rich

By Markets Fool.com

Square has become a popular payment processor, but it's yet to make money for investors. Image source: Square.

Continue Reading Below

Balancing risk and reward in investing is always key for investors. Taking risks can lead to massive gains if you get the picks right. And if you're someone who's willing to take risks to find a high potential stock, here are a few companies you should keep on the top of your list.

Square

There's no question Square is in a challenging position in payment processing. It's going up against giants like Intuit and Paypal, but it has a cache the others don't with an elegant, easy to use interface for processing payments. What could separate Square long-term is its growing suite of back office software, which make it easier to use Square for payment processing and most other accounting activities. That integration is a big advantage for small businesses and it's why Square is a go-to product for start-ups.

The problem Square has had is that it doesn't currently make money. One reason is the investment it's making in back office software. Management knows it needs to add capabilities in accounting, business loans, and payroll to attract customers and keep competitors at bay, but eventually those investments can be leveraged to grow the bottom line.

Leverage will require continued top line growth and that seems to be going well for Square. Gross payment volume grew 45% in Q1 2016 to $10.3 billion and adjusted net revenue was up 64% to $146 million. The company needs to continue its growth momentum to be a big winner for investors, but if it can succeed in keeping growth numbers up the company could be a big winner for investors.

Continue Reading Below

Image source: Getty Images.

SunPower

Solar energy is quite literally a multi-trillion dollar market potential. And it's just starting to realize that potential, accounting for less than 1% of electricity generation globally. But the industry is starting to grow in a more sustainable (less subsidized) way and competing with fossil fuel power plants on cost. And efficiency leader SunPower has perhaps the most potential of any solar company. It has exposure to every size of solar power generation -- from small handheld devices to the world's largest power plants -- and has a presence in nearly every country where solar energy is being installed.

Despite all of that potential, SunPower's market cap is only $2.1 billion and the stock trades at just 8.2 times forward earnings estimates. I think that's a steal for a company expecting to triple solar panel production between 2015 and 2019. SunPower is an industry leader in an industry that's growing rapidly with multi-trillions of dollars in annual revenue potential. That's a stock that could make you rich.

Fitbit

There's no question smart watches and devices are growing in popularity. Fitbit was an early leader, but there was concern that companies likeApple and Samsung would take market share when they entered the market. Their entrance has provided a challenge, but it hasn't proven to be a huge deterrent to Fitbit. The company is still growing rapidly and has a lot of potential ahead.

FIT Revenue (TTM) data by YCharts

Apple, in particular, has proven to be a formidable foe, but it has its weaknesses. The Apple Watch is only compatible with iOS and doesn't work well with other devices or platforms. Fitbit is operating system agnostic, meaning customers who own iPhones, Samsung phones, or even without a smartphone can use their devices.

Fitbit has also made improvements moving into smarter watches and scales as well. That movement into more devices will continue and could continue to grow the business. If Fitbit can remain popular and keep growing it could be a big winner for investors with shares trading at just 9.6 time forward earnings estimates.

The article 3 Stocks That Could Make You Rich originally appeared on Fool.com.

Travis Hoium owns shares of Apple, PayPal Holdings, and SunPower. The Motley Fool owns shares of and recommends Apple, Intuit, and PayPal Holdings. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool recommends Fitbit. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.