There's a long list of high-flying stocks out there this year, as the stock market has so far turned in a respectable performance. A select few, though, have already doubled in value since 2017 kicked off.
Here are three of the best-performing stocks, screened for a market cap of at least $250 million, with year-over-year revenue and profit improvement.
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Where all that fiber comes from
Technology companies are building lots of data centers, and that's good news for Applied Optoelectronics (NASDAQ: AAOI). AOI's bread and butter is making the components that are used in fiber optic networks, including data centers, cable TV networks, and telecom. Data centers made up 83% of business during the first quarter, increasing 104% from last year. The stock is up 160% in 2017.
Total first-quarter revenue increased 91%, and management sees the big gains continuing. The outlook is for second-quarter sales of between $106 million and $112 million, another 92% increase at the lower end of guidance. Providing the boost is again data centers. In a recent press release, the company said it will be able to ramp up production of its laser diodes used in data centers to 1 million a month. In May, only 600,000 were produced, speaking to the continued ambitious expansion this tech provider is pursuing.
Upgrading tech component manufacturing
Semiconductors are a cyclical business, with growth coming and going. Companies in the sector have enjoyed a recent surge since last year, after a big wave of mergers and with the Internet of Things movement gathering speed. Semiconductor equipment and systems developer Ultra Clean Holdings (NASDAQ: UCTT) has ridden that wave, too, with shares up well over 100% this year through early June.
The stock has recently pulled back from its highs, but the company's momentum remains impressive. Revenue at last report had surged 82% year over year, as demand for semiconductor equipment, especially in Asia, went up with the uptick in semiconductor demand. Second-quarter expectations are for sales to increase again year over year, albeit at a more modest 63% pace.
Changing the way we go to the doctor
Health care may not be everyone's favorite topic right now unless you own Teladoc (NYSE: TDOC) stock. The largest on-demand remote healthcare provider is growing as high costs and political debate has sent many in search of a better way to get medical treatment. During the last quarter, Teladoc had over 20 million members and 385,000 patient visits, a 34% and 60% annual increase, respectively.
In June, the company also announced it was buying out smaller rival Best Doctors, which provides similar telephone or internet-based doctor visits but in non-overlapping areas of expertise. That could help Teladoc continue to grow its top line, but it could also give a boost to the bottom line. Best Doctors runs at a profit, which Teladoc expects will help it run at breakeven on an EBITDA basis by year's end. The stock is up over 110% in 2017.
Have these ships sailed?
Investors should never buy a stock simply because it's outperforming the market. Such a strategy is likely to lead to disappointment. That doesn't necessarily mean the tank has run dry on these three companies, though.
In the case of Applied Optoelectronics and Ultra Clean Holdings, investors need to remember that tech suppliers and component makers are cyclical. Both companies have reported big year-over-year revenue gains, but if the pace of those increases starts to slow down, a big pullback in share prices could be nigh.
Teladoc, on the other hand, has the potential to earn more consistent revenue from recurring membership fees and patient visits through phone or teleconference. In light of rising costs and question marks surrounding the U.S. healthcare system, the company has the potential to be a major disruptor and woo more members.
Regardless of how the second half of 2017 plays out for these three stocks, investors should temper expectations for them. Do some homework before making an investment, and don't be surprised if they fail to double again in price or even fall in value by year's end.
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