Finding a great growth company isn’t always easy.
The key is sustainable growth.
That’s why it’s important to identify companies that not only have strong track records but are also latching on to sustainable trends.
These tailwinds can help it to sustain its growth rate over the long term, thereby netting you a winner if you can hold on to its shares.
It’s a good idea to include a couple of fast-growing companies in your investment portfolio as they could bring in additional returns.
That said, you should also be mindful of the risks associated with fast-growing businesses as their growth may slow someday, leading to a painful share price correction.
Here are four companies that are growing at breakneck speed.
Texas Roadhouse (NASDAQ: TXRH)
Texas Roadhouse is a restaurant chain that serves fast-casual western food.
The company was started in 1993 and has grown to 654 restaurants located in 49 states in the US and nine other countries.
Shares are up around 13.2% year to date, closing at the US$84.08 mark.
Texas Roadhouse reported a strong set of earnings for its fiscal 2021 third quarter (3Q2021) and first nine months (9M2021).
9M2021 revenue rose by 46% year on year to US$2.6 billion and was nearly 27% higher than the US$2 billion revenue recorded in the first nine months of 2019 before the pandemic broke out.
The company logged a net profit of US$192.2 million and also declared a quarterly dividend of US$0.40 per share.
The trailing 12-month dividend yield stood at 1.9%.
Comparable store sales jumped by 30.2% year on year for 3Q2021, and the company opened seven new restaurants during the quarter.
The company had just signed its first franchise development agreement for Jaggers, a fast-casual dining concept offering burgers, sandwiches and chicken tenders.
DocuSign (NASDAQ: DOCU)
DocuSign is a company that offers an electronic signature service through its Agreement Cloud product.
The company has more than a million customers located in over 180 countries that use its cloud-based software.
For the first nine months of its fiscal 2022 (9M2022), total revenue surged by 49.3% year on year to US$1.5 billion.
Of this, 96.5%, or US$1.47 billion, came from subscription-based revenue.
For the quarter, DocuSign reported that billings increased by 43% year on year to US$565 million.
The total customer base has also exceeded a million, growing from 589,000 at the end of its fiscal year 2020 (FY2020).
DocuSign’s customer base is also spending more, with customers with more than US$300,000 in annual contract value increasing to 785 from 437 as of FY2020.
Etsy (NASDAQ: ETSY)
Etsy operates an online marketplace that is known for selling unique, handcrafted items.
Its portfolio of brands includes Depop, a fashion resale marketplace, and Reverb, a musical instrument marketplace.
Revenue for 9M2021 climbed by 45.4% year on year to US$1.6 billion, in tandem with the 39.2% year on year increase in gross merchandise sales (GMS) to US$9.3 billion.
Net income surged by 65.4% year on year to US$332 million.
Habitual buyers on Etsy’s platform have surged, going from 4.8 million in the third quarter of fiscal 2020 to eight million in the current quarter.
It’s good news for the company as this means that more of its customers are “sticky” and are purchasing more frequently through its platform.
What’s more, GMS per buyer also increased by 20% year on year to US$132, in a clear sign that not only is Etsy garnering more loyal customers, but that they are also spending more on its platform.
Mercadolibre (NASDAQ: MELI)
Mercadolibre is one of the largest e-commerce marketplaces in Latin America.
The company also runs a payments solution called Mercado Pago and runs a fulfillment service called Mercado Envios that handles logistics and warehousing.
Mercadolibre has enjoyed a surge in users and increased activity on its platform as more people went online in the last 18 months.
For its latest quarter ended 30 September 2021, gross merchandise volume jumped by 24% year on year to US$7.3 billion.
The number of payment transactions on the company’s platform increased by 54.7% year on year to 865.7 million, resulting in a 44% year on year jump in total payment volume to US$20.9 billion.
As a result, net revenue for 9M2021 soared by 86.6% year on year to US$4.9 billion.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
