Picks | Discover high-quality growth stocks to add to your watchlist.
Interest rates are on the rise and pushing stock prices down. But with cheaper prices, comes greater opportunities. And these four stocks may be just what you are looking for.
In this week’s Edge Picks, we explore:
An overlooked Chinese e-commerce company with serious upside potential.
The hardest-hitting stock you have ever seen.
An up-and-coming fintech firm growing revenue at 98% YoY.
A telemed tech stock with 81% gross margins.
Let’s dive in.
|Vipshop Net Income and Margins | Vipshop
Vipshop Holdings (VIPS)
Do not overlook this one-of-a-kind retailer, Vipshop Holdings is a powerhouse in the online retail landscape of China. Through its diverse segments, including Vip.com, Shan Shan Outlets, and Others, Vipshop offers a vast array of products, ranging from fashion for women, men, and children to skincare, cosmetics, home goods, and even supermarket products. What’s more, the company offers internet finance services that cater to both consumers and suppliers. This all-encompassing business model helps set Vipshop apart by allowing it to deliver high-quality branded products to Chinese consumers and beyond.
Return on Invested Capital: 12.30%
Profit Margin: 7.20%
Earnings Per Share (5-Year): 25.90%
Revenue (5-Year): 7.20%
Debt to Equity: 0.02
Market Cap: $7.907 Billion
Current Stock Price: $14.63
Intrinsic Value: $35.33
Margin of Safety: 58.59% Below Intrinsic Value
Diverse Product Offerings: From fashion and beauty to home goods and even supermarket items, Vipshop provides an extensive range of products. This breadth appeals to a wide customer base, offering something for everyone. With one platform, consumers can satisfy multiple shopping needs, enhancing customer loyalty and increasing sales.
Internet Finance Services: By offering consumer and supplier financing, Vipshop not only facilitates smoother transactions on their platform but also creates additional revenue streams. This financial flexibility can be a compelling reason for businesses and individuals to choose Vipshop for their shopping and financial needs, strengthening customer retention and engagement.
Retail Expansion: Vipshop’s move beyond online platforms into retail stores is a visionary step. This hybrid approach bridges the gap between digital and physical retail, providing customers with a seamless shopping experience. It not only caters to consumers’ preference for in-store shopping but also allows them to experience Vipshop’s products in a tangible way. This omnichannel strategy positions Vipshop as a frontrunner in the retail industry, reaching customers where they prefer to shop.
|UFC & WWE 2022 Revenue Breakdown | TKO
TKO Group (TKO)
Movie & TV Production and Distribution
Looking for that knockout punch to take your portfolio over the top? TKO Group is the product of two of the largest combat organizations in the world, UFC, and WWE, joining forces. Through its business, TKO offers a dynamic set of products and services including Media and Content, Live Events, Sponsorships, and Consumer Products Licensing. This includes a massive merchandising effort that includes video games, apparel, equipment, trading cards, memorabilia, digital goods, toys, travel packages, tickets, and more. Plus, with its impressive corporate sponsorships and advertising business, TKO has become a multifaceted entertainment giant that spans the globe, making it one of the most unique companies you can buy.
Return on Invested Capital: 19.00%
Profit Margin: 13.20%
Earnings Per Share (5-Year): 31.70%
Revenue (5-Year): 10.00%
Debt to Equity: 4.64
Market Cap: $6.602 Billion
Current Stock Price: $79.33
Intrinsic Value: $268.67
Margin of Safety: 70.47% Below Intrinsic Value
Global Reach and Diverse Content: TKO Group’s extensive reach across approximately 170 countries is a substantial competitive advantage. This global presence allows them to deliver a wide range of content, including live events, television programs, and video content, to a diverse and vast audience. In an era where content is king, TKO’s ability to captivate viewers and fans on a global scale provides a significant edge in the industry.
Merchandising Mastery: TKO’s ability to monetize not only physical products like apparel, memorabilia, and toys but also digital goods, travel packages, and tickets provides multiple revenue streams. This diversified approach enhances financial stability and offers investors a comprehensive opportunity to tap into various consumer spending trends.
Innovative Advertising and Sponsorships: TKO Group offers innovative solutions for in-venue and in-broadcast advertising, content product integration, and digital impressions. In an evolving media landscape, where advertising and sponsorship opportunities are highly sought after, TKO’s ability to create engaging, immersive, and revenue-generating experiences sets them apart in the sports and entertainment industry.
|DLocal Total Payment Volume (TPV) | DLocal
Bursting on the scene, DLocal is an up-and-coming online payments processor, providing an essential service for businesses across the globe. With its cutting-edge payments platform, the company empowers merchants across a wide array of industries, including commerce, streaming, ride-hailing, financial services, and many more, to seamlessly receive payments and make transactions online. This reach extends to a multitude of sectors, making it an indispensable financial partner in the digital age, and is a large reason why the company’s growth has exploded since its inception.
Return on Invested Capital: 33.65%
Profit Margin: 25.00%
Earnings Per Share (3-Year): 59.26%
Revenue (3-Year): 98.13%
Debt to Equity: 0.01
Market Cap: $5.38 Billion
Current Stock Price: $18.55
Intrinsic Value: $12.61
Margin of Safety: 47.11% Above Intrinsic Value
Global Payment Processing Expertise: DLocal’s standout advantage is its expertise in global payment processing. The company has mastered the intricate web of international transactions, enabling merchants to accept payments from customers around the world seamlessly. This is crucial in today’s interconnected digital economy where businesses need to transcend borders to expand their customer base.
Diverse Industry Coverage: From e-learning to gaming, crypto to ride-hailing, DLocal serves diverse sectors, demonstrating its versatility. Its ability to provide tailored payment solutions for various industries showcases its in-depth understanding of the unique challenges and requirements faced by businesses across the spectrum.
Simplified Online Transactions: DLocal excels at simplifying online transactions. Its platform streamlines payment processes, making it easier for both merchants and customers. This simplicity not only enhances user experience but also reduces friction in the payment process, potentially boosting conversion rates for businesses. In an era where digital commerce is booming, this ease of use is a compelling advantage.
|LifeMD Revenue| LifeMD
Want a fast-growing stock in the medical tech space? LifeMD is at the forefront of the telehealth revolution, seamlessly connecting consumers to healthcare professionals across a spectrum of medical needs. Through their innovative brands, like ShapiroMD, RexMD, and LifeMD Primary Care, they offer virtual medical treatment, prescription medications, and a range of FDA-approved solutions for issues spanning from hair loss to primary care. Additionally, the company penetrates specialized fields with brands like Cleared and NavaMD, offering personalized treatments in allergy, asthma, immunology, and dermatology. This strong e-commerce presence, commitment to modern healthcare, and diverse range of offerings make LifeMD an interesting pick in the quickly evolving telemed market.
Gross Margin: 81.25%
Revenue (5-Year): 110.44%
Debt to Equity: n/a
Cash on Hand: $11.91 Million
Market Cap: $230.25 Million
Current Stock Price: $6.67
Telehealth Industry Boom: The telehealth industry is in the midst of a transformative surge, driven by the increasing adoption of virtual healthcare services. LifeMD, as a direct-to-patient telehealth company, is ideally positioned to ride this wave. The catalyst here is the continued growth of telehealth services, which is expected to persist as more patients and healthcare professionals recognize the convenience and efficiency of remote medical care.
Diverse Medical Offerings: LifeMD’s expansive range of medical brands, from primary care to specialized fields like dermatology and men’s health, is a significant catalyst. This diversity caters to a broad spectrum of patient needs. As consumers increasingly seek comprehensive healthcare solutions online, LifeMD’s multi-brand strategy offers a compelling value proposition that can drive substantial growth.
Digital Solutions in Healthcare: In an era where digital solutions are transforming the healthcare landscape, LifeMD’s innovative approach is a catalyst in itself. The company’s ability to provide virtual consultations, prescription medications, and FDA-approved medical devices aligns perfectly with the modern patient’s expectations for convenient, efficient, and effective healthcare. As more patients embrace these digital healthcare solutions, LifeMD stands to benefit significantly.
Our first goal as investors is to never lose money. The most effective way to accomplish this is by investing in world-class businesses that are trading below their intrinsic value. A world-class business is financially healthy (i.e. high-profit margins, growing revenue and earnings, as well as little to no debt), has multiple durable competitive advantages, and has a brilliant management team (i.e. ROIC measures how effectively a CEO allocates capital). We strive to buy these businesses below their intrinsic value because it limits the downside risk while improving the upside potential (i.e. think of it like buying a Ferrari at 50% off, then selling it to someone else at full price, risk-free). If one can find these opportunities and their conviction is strong, then one should take full advantage before the rest of the market realizes what they are missing.
Small or early growth companies (i.e. less than $1 billion market cap) may not be profitable or have a durable competitive advantage quite yet, but they still pack a punch. Investing in these businesses is a tricky game, but if you can spot them before they take off, it may be the only investment you ever need to make. To spot a rising star, the business must be financially stable (i.e. high operating margin, growing revenues, little to no debt, and ample cash on hand), have a large addressable market with multiple catalysts, and a highly ambitious and motivated management team that is willing to do whatever it takes to succeed. If you can find early-stage businesses with these characteristics, then you may be on the path to financial freedom quicker than you think.