It’s not easy to find companies that display long-term growth potential.
Even more so when a pandemic threatens to permanently disrupt our way of life.
Although it’s hard to tell how life will be like post-pandemic, the last nine months have given us some clues.
Certain trends that have emerged include the need for telecommuting, a surge in demand for food delivery services, and the increased adoption of digital payments.
Digitalisation has been pushed to the forefront as businesses and individuals hunker down amid widespread lockdowns and movement control restrictions as the coronavirus runs rampant through certain regions such as the US and Europe.
What was once a slow trend has now been rapidly accelerated because of the pandemic.
Some of these new habits may be here to stay.
Here are four companies that display excellent growth prospects based on the new normal forced upon us by this crisis.
Peloton (NASDAQ: PTON)
Peloton is a company that offers an interactive fitness platform for virtual workouts, and also sells exercise equipment such as exercise bikes and treadmills.
With more people cooped up at home, many have taken to signing up with the company to continue to stay fit and healthy.
In the company’s fiscal 2021 first-quarter shareholder letter, it reported that fitness subscriptions had more than doubled from 563,000 the year before to 1.3 million, while total workouts quadrupled from 19.2 million to 77.8 million over the same period.
Meanwhile, Peloton’s member base more than doubled from 1.6 million in the first quarter of the fiscal year 2020 to 3.6 million in the current quarter.
Along with it, the company’s financials have also soared with the vast improvement in operating metrics.
Sales of fitness equipment rose by 274% year on year to US$601.4 million, pushing total revenue up 232.4% year on year to US$758 million.
Net profit clocked in at US$69.3 million, a big improvement from last year’s net loss of US$50 million.
Paypal (NASDAQ: PYPL)
Paypal operates a worldwide online payments system that uses technology to facilitate online and digital payments.
It acts as a middleman between merchants and end-users, acting as a catalyst for funds transfers to take place.
For Paypal’s third-quarter earnings, total payment volume soared 38% year on year to US$247 billion, while the company also added 15.2 net new active accounts.
The company ended the quarter with 361 million active accounts, and this strong performance helped to lift revenue by 25% year on year.
This quarter ended up being one of Paypal’s strongest in history, boosted by the adoption of digital payments as a result of the pandemic.
CEO Dan Schulman plans to create a digital wallet that includes all forms of digital currencies and payments to bridge the online and offline world.
This ambitious plan should continue to drive growth for Paypal over the long-term.
Top Glove Corporation Berhad (SGX: BVA)
Top Glove is one of the largest manufacturers of gloves in the world.
The company has over 2,000 customers worldwide, exports to more than 195 countries and has a glove production capacity of 85.5 million pieces as of 17 September 2020.
The COVID-19 pandemic has significantly driven up demand for nitrile healthcare gloves, leading to the company reporting surging revenue and net profit.
For the fiscal year ended 31 August 2020, revenue surged 51% year on year to RM 7.2 billion, while net profit after tax went up more than five-fold from RM 365,000 to RM 1.9 billion.
Top Glove will pay out a dividend of 11.8 sen, more than four times what it paid out last year.
To cope with the strong demand, the company is constructing new factories and glove production lines to bring total capacity to a planned 120.6 billion pieces by the end of December 2022.
Separately, the company also announced its intention to explore a dual primary listing on the Hong Kong stock exchange to provide it with yet another fund-raising platform for further growth.
Tractor Supply Company (NASDAQ: TSCO)
Tractor Supply is the largest rural lifestyle retailer in the US and offers an extensive mix of products for home care, farms and rural communities.
As of 26 September 2020, the company operated 1,904 Tractor Supply stores in 49 states. It also operates 183 Petsense stores in 25 states that offer a variety of pet products and services.
The company’s business has remained resilient during the pandemic as rural communities continue to rely on it for essential supplies.
For Tractor Supply’s third-quarter earnings, it reported a 31.4% year on year increase in net sales, while comparable store sales surged 26.8%.
Net profit soared by 56.1% year on year to US$190.6 million for the quarter and was up 46.6% year on year for the first nine months of 2020.
The company declared a quarterly dividend of US$0.40, up from the US$0.35 declared in the same period last year.
Tractor Supply has prioritised five growth pillars that should help it to achieve multi-year growth moving forward.
These centre around customers, digitalisation, execution, team members and total shareholder return.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
