Experienced investors in search of growth know to look beyond current trends and market momentum or rely on pundit's expectations. Today's results are important to consider, of course, but for bright investors, it's the future that matters, and the futures of NVIDIA (NASDAQ: NVDA), electronics giant Samsung (NASDAQOTH: SSNLF), and biopharma upstart Clovis Oncology (NASDAQ: CLVS) look awfully bright.
Blazing a trail
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Tim Brugger (NVIDIA): Given its lofty valuation and recent stock price run-up, it would be easy to pass NVIDIA by. Since announcing earnings on May 9, NVIDIA stock has skyrocketed 45%. After the run-up, NVIDIA is valued considerably higher than its peers as measured by its trailing price-to-earnings ratio of 50 and price-to-sales ratio of 13, more than triple that of the industry's average of 4.
Before tossing in the towel on NIVIDIA, smart investors will find it makes a compelling growth alternative. Gaming remains one of NVIDIA's bread-and-butter revenue drivers and its new GeForce, virtual reality (VR) ready graphics processing units (GPUs) are already an industry standard. So, its safe to say NVIDIA's gaming dominance will continue.
However, gaming is just the tip of the iceberg for NVIDIA. According to founder and CEO Jensen Huang, one of the keys to NVIDIA's stellar 48% jump in sales last quarter to $1.94 billion was its "datacenter GPU computing business nearly tripled from last year." NVIDIA is making inroads to the fast-growing data center market due to its commitment to industry-leading artificial intelligence (AI) solutions.
Hosting data in the cloud is fine, but utilizing AI to conduct complex analytics and provide actionable results is where the real opportunities lie, and NVIDIA is a force to be reckoned with. Combined with its work on drones and autonomous cars, NVIDIA is becoming the provider of choice in several multibillion-dollar market opportunities. For bright growth investors who can see beyond today's valuations, NVIDIA warrants serious consideration.
A literal bright growth stock
Rich Smith (Samsung): When you say "bright," I think "light." And specifically, I think about the newest thing in television viewing these days: organic light-emitting diodes, or OLED.
Not everyone has an OLED TV yet, of course. In fact, among Americans who've made the switch to flat screens, most of us are still making do with previous-generation plasma, LCD, and (non-O) LED television sets. But whether you're talking LCD, LED, or (soon) OLED, there's one name that's practically synonymous with all these new ways to light up the boob tube: Samsung (NASDAQOTH: SSNLF).
According to statistics clearinghouse statista.com, Samsung boasts a 21.6% global market share in LCD TVs, for example -- nearly twice the market share of No. 2 global TV maker LG. What's more, Samsung's dominance in television manufacture is only getting stronger, with its market share growing every single year since 2010. And earlier this year, Samsung unveiled a new bendable "active matrix" OLED screen that it calls the "dynamic stretchable AMOLED display," a product that promises to only grow Samsung's dominance in TVs.
While most people know that Samsung, the company, is dominating this business, however, some may not realize that it is also a publicly traded stock. It's not listed here in the U.S., of course. But Samsung's stock does trade over the counter. And while that's not an ideal solution for investors, the valuation on Samsung stock is such that even if OTC is the only way to buy it, it's still worth considering.
Just how cheap is Samsung stock? According to data from S&P Global Market Intelligence, at a market capitalization of $254 billion, the $21.8 billion in net profit that Samsung earned last year works out to a P/E ratio of only 11.6. That's not a high price to pay for such a dominant company. It's even more of a bargain when you realize that analysts who follow Samsung stock believe the company will grow its earnings at more than 22% annually over the next five years. That growth rate, if achieved, would give Samsung stock a PEG ratio close to 0.5 -- a remarkable bargain for a growth stock and a bright idea for investors to look into.
This red-hot oncology stock is only going to go higher
George Budwell (Clovis Oncology): Clovis Oncology's stock has been on absolute fire over the last year, gaining over 546%. The underlying reason is the accelerated approval of its third-line ovarian cancer treatment, Rubraca, for patients who have the BRCA gene mutation last September.
Adding fuel to the fire, Clovis also recently reported that Rubraca met its primary endpoint in late-stage trial that could lead to a label expansion into the second-line and later maintenance settings for women with platinum-sensitive ovarian cancer who have responded to their most recent platinum therapy. Taken together, these various indications in the ovarian cancer space are forecast to drive Rubraca's sales into the $750 million to $1 billion range at peak.
So why is this stock still attractive for bright investors? The basic issue is that Clovis' current valuation of $4.16 billion arguably doesn't even reflect Rubraca's commercial opportunity -- much less what the company may fetch in a buyout scenario. Promising early commercial-stage oncology companies, after all, frequently trading close to five times the peak sales potential of their flagship product.
Moreover, it's become fairly commonplace in the past few years for oncology companies to garner astronomical premiums in a buyout. Pfizer, for example, paid a whopping $14 billion to acquire only half of the commercial rights to the advanced prostate cancer drug Xtandi, and AbbVie paid a jaw-dropping $21 billion for roughly half of the blood cancer drug Imbruvica. Put simply, Clovis should be in the catbird seat if a suitor comes knocking at the door.
All told, Clovis is a company that should offer decent upside potential either through organic revenue growth or in a buyout. And that's the kind of dual threat that should intrigue the smartest investors.
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George Budwell has no position in any stocks mentioned. Rich Smith has no position in any stocks mentioned. Tim Brugger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Nvidia. The Motley Fool has a disclosure policy.