The market might look frothy at its current all-time highs, but many companies are still growing their revenues at triple-digit rates. Let's check out three companies which could double their revenues this year -- Coherent (NASDAQ: COHR), Momo (NASDAQ: MOMO), and Invitae (NYSE: NVTA) -- and see if they're worth buying.
Coherent sells lasers for commercial and scientific research applications. Market demand for its precision lasers has been rising thanks to their ability to cut smaller products for the industrial, tech, and healthcare markets. For example, manufacturing smaller silicon chips or thinner flat panel displays wouldn't be possible without those precision lasers.
Coherent's annual revenue growth has accelerated over the past four quarters, and rose a whopping 112% last quarter. CEO John Ambroseo attributed that growth to "very strong demand" across all the company's end markets, with the microelectronics, semiconductor, materials processing, medical device, and consumer electronics markets all posting robust growth. Year-over-year comparisons were also boosted by its acquisition of rival Rofin-Sinar Technologies last November.
Demand for Coherent's products is cyclical, but analysts believe that its growth hasn't peaked yet. Wall Street expects Coherent's revenue to rise 99% to $1.7 billion before cooling to 14% growth next year. Its non-GAAP earnings are expected to jump 164% this year and 17% next year.
Chinese tech company Momo's namesake social app lets users find nearby users based on their personal profiles and contact them. Due to its widespread use as a dating app, it's often dubbed the "Chinese Tinder". Momo also runs a live streaming video platform, which lets viewers buy virtual gifts (from Momo) for their favorite broadcasters, as well as a mobile gaming platform.
Momo posted triple-digit annual revenue growth over the past three quarters, thanks to the growth of its live video streaming platform. Momo's monthly active users (MAUs) rose 18% annually to 85.2 million last quarter, but its live video revenue surged from $15.6 million to $212.6 million, accounting for 80% of its top line.
That growth boosted Momo's total revenue by 421% during the quarter. That growth rate is unsustainable, but Wall Street still expects Momo's revenue to rise 122% this year and another 37% next year. Its non-GAAP earnings are expected to grow 81% this year and 41% next year.
Invitae's software tools process DNA samples, analyze genetic information to spot genetic conditions, and generate test reports for clinicians. Its customizable tests can spot genes associated with hereditary cancer, neurological disorders, cardiovascular disorders, and other conditions. It collects this data in a "genome network", which can be used to research diseases.
Invitae went public in early 2015, and its revenue rose nearly 200% to $25.1 million in fiscal 2016. Analysts expect that growth to continue, with 140% growth this year and 106% growth in 2018.
Invitae's accessioned samples, a key benchmark of its growth, rose 166% annually to 26,000 last quarter. CEO Sean George expects that figure to hit 110,000 to 120,000 this year and generate $55-$65 million in annual revenue.
But here's the catch -- Invitae has never posted a profit, and isn't expected to do so over the next two years. That's because the costs of developing and running all those genetic tests still easily outweigh its revenue growth.
Should you buy these three stocks today?
Coherent, Momo, and Invitae could all double their sales this year, but they're all risky plays. Coherent is a cyclical stock that could plummet during a market downturn, and its trailing P/E of 55 remains much higher than the industry average of 30 for technical instrument makers. Momo's P/E of 41 is also higher than the industry average of 38 for internet information providers.
Invitae is deeply unprofitable, and its whopping P/S ratio of 11 (versus the industry average of 3 for diagnostics and research equipment makers) indicates that investors could be too optimistic about the stock. Therefore, investors should weigh these risks and rewards before touching any of these high-growth stocks.
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