3 Young Companies To Watch Heading Into 2022

If you look at CarGurus NASDAQ: CARG, Smart Global NASDAQ: SGH , and Floor & Decor NYSE: FND, you may not recognize at first what all three have in common. 

But if you look carefully at their charts, you’ll see that all three went public in the past few years, and have been rallying in the recent months.

Newer IPOs - meaning those companies that went public in the past several years - are almost always in the ranks of the fastest-growing growth stocks.

There’s a reason for that. These companies are primed for growth, and often boast strong revenue growth before going public, even if they are not yet profitable. Managers are incentivized for fast growth, and the companies tend to be nimble enough to pivot quickly if necessary. 

After two to five years on the public markets, stocks have enough of a track record through market cycles to determine whether institutional investors are supporting the stock. 

Here are three companies that went public in 2017 and are showing good technical and fundamental strength. 

CarGurus is trading near its November highs after successfully testing its 50-day average in each of the past three weeks. 

The company’s online marketplace connects buyers and sellers of new and used cars. It’s notched a profit every year since going public, although revenue growth skidded last year as car sales declined throughout the U.S. 

Even with three quarters in a row of lower sales, CarGurus still notched double- or triple-digit profit growth. While sales slowed, many dealers raised prices; car dealerships overall had strong profits in 2020. 

The company’s revenue comes mainly from car dealers paying for subscriptions to its marketplace. 

In January, CarGurus purchased a 51% stake in CarOffers, which enables car dealers to buy and sell from each other, streamlining what had been a clunky process. Effects of that acquisition arrived quickly: In the first quarter, wholesale and other revenue climbed to 19%, due to the acquisition. That category increased in the subsequent two quarters. 

The stock is currently in buy range after the support at the 50-day line. 

Smart Global, which went public in May, 2017, produces specialty products including memory modules, solid state storage products and other solutions critical to electronic devices. 

The company’s customer base includes equipment manufacturers in computing, networking, communications, storage, mobile, military, aerospace and industrial markets. 

The stock twice hit resistance below $59 earlier this year before finally clearing that ceiling in early November. Since then, Smart Global has traded in a choppy fashion, rallying to new highs in Wednesday’s session. 

Revenue growth accelerated in the past three quarters, from 7% to 57%. Earnings growth also accelerated during that time, from 42% to 163%. 

The company is due to report its fiscal first quarter on January 4. Analysts expect earnings of $1.74 per share on revenue of $460 million. Both would be year-over-year increases. Smart Global topped both earnings and revenue estimates in the past four quarters, according to earnings data compiled by MarketBeat. 

Floor & Decor was a beneficiary of the homebuilding, moving and remodeling trends that took hold in 2020.

The company, which went public in April, 2017, is up 4.76% in the past three months, 41.43% year-to-date and 55.32% in the past year.

Revenue grew at double-digit rates in seven of the past eight quarters. Earnings growth has been more erratic during that time. The one quarter without top- or bottom-line growth was the quarter ended June 2020, which reflected the effects of Covid lockdowns early in the pandemic. 

The stock rallied to a high of $145.89 on November 4, the same day the company reported better-than-expected third-quarter results. In the following session, shares fell 7% in heavier-than-normal volume. 

In the quarterly earnings call, CEO Tom Taylor addressed supply-chain challenges, especially as it pertains to the company’s Professional Services division, which faced uncertainty about product lead times and rising costs. 

“While the global supply chain disruption remains challenging, we are successfully managing our inventory flow and merchandise in-stocks by being flexible with our supply chain, leveraging our diverse countries of origin and the support of our vendor and supply chain partners,” Taylor said. 

The stock is buyable at this time, as it’s getting support above key moving averages.