Building generational wealth is often a lifelong pursuit, but the right investments can shorten the time frame considerably.
Thanks to the the stock market retreat this year, there are several companies with enormous growth potential trading at rock-bottom prices.
Here are three of the top stocks investors to consider for building generational wealth by 2040.
Also known as Planet.com, Planet Labs (NYSE:PL) is a satellite imaging company that has managed to create an effective moat by compiling a massive library of images. The company maps the entire Earth daily with its fleet of 240 satellites.
This data has enormous value to both private companies and government entities, making Planet Labs a strong growth prospect.
In the most recent quarter, the company’s revenues rose 23 percent to $37.1 million. Gross margin also climbed from 25 percent from a year earlier to 37 percent. Net customer count, meanwhile, grew by 25 percent.
Overall, Planet Labs shows many signs of strong growth. Although it is clearly in its early stages, the company’s value could be enormous in 5-10 years.
Planet Labs could have massive upside potential over the next 12 months. The median target price for the stock based on eight analyst ratings is $11.25, a gain of 118.9 percent against the current price of $5.14. The lowest target of $10 would give Planet Labs a 94.6 percent upside.
With the potential to double within a single year, Planet Labs could be one of the top gainers of the next 12 months. Even lackluster performance against these expectations would allow the company to significantly outperform historical market returns.
To fully unlock the value of its image library, Planet Labs will need to develop machine learning tools its customers can use to draw specific insights.
The company is also racking up steep losses as it continues to invest in imaging technology. Planet Labs will need to overcome these obstacles to escape gravity, however, shareholders who buy early will likely see exceptionally strong returns on their initial investments.
Advertising technology company PubMatic (NASDAQ:PUBM) is one of two major players on the sell-side of the ad industry.
Despite a challenging environment for digital advertisers, PubMatic reported revenue growth of 25 percent year-over-year in Q1. This was on top of 54 percent growth in the same quarter last year. Given the robust growth that PubMatic is producing, it’s a natural candidate for long-term investors.
Even more impressive is PubMatic’s ability to generate profits so early on. The company has a net income margin of approximately 20 percent and generated earnings of $0.99 per share on a trailing 12-month basis.
Considering that the company only went public in 2020, this puts it far ahead of the typical profitability curve for tech companies.
Although its long-term potential is huge, PubMatic’s near-term prospects aren’t as bright as Planet Labs’. The median target price for the stock over the next 12 months is $27. While still 45.2 percent above the current price of $18.59, this projection is well below the 100+ percent gains Planet Labs could deliver.
PubMatic makes up for this shortfall with its superior value. The stock currently trades at a P/E ratio of 28.7 and a price-to-sales ratio of 4.05. While quite high by the standards of more established companies, these ratios are quite reasonable for a company with Pubmatic’s potential for long-term growth.
PubMatic is vulnerable to macroeconomic factors, introducing a higher element of risk than the company would have seen a few years ago.
Assuming conditions don’t worsen, though, management expects further growth of 25 percent YoY in 2022. If this sets a long-term trend for the fledgling company, PubMatic could become a huge winner in the advertising industry by 2040.
Singaporean tech conglomerate Sea Limited (NYSE:SE) has sold off by over 65 percent YTD, leaving it an attractive buy for both growth and value investors. The company began as a gaming platform before later entering the more lucrative digital payment processing industry.
In Q1, Sea Limited’s revenues rose 64 percent, reaching $2.9 billion. Losses accelerated to $445 million, though the final reporting beat analyst expectations handily.
Gross merchandise volume at the company’s eCommerce platform, Shopee, also grew by 39 percent.
Much of the loss reported in Q1 has been explained by management as rapid investment in new facilities and staff to keep pace with the company’s growth.
Sea Limited has a unique opportunity as Southeast Asia and other emerging economic areas that continue to enter the digital world.
Increasing trade tensions between the US and China could create windfalls for tech companies like Sea Limited as Western companies look elsewhere in Asia for opportunities to invest. Sea Limited has also made inroads in Latin America, where similar growth prospects exist.
Like the other stocks listed here, Sea Limited has both considerable short-term and long-term potential. The median 12-month target price for Sea Limited is $135, up 76.9 percent against the current price of $76.31. This puts Sea Limited in an incredibly strong position for future growth.
Thanks to the massive selloff it has experienced this year, Sea Limited also looks good from a value perspective. The stock currently trades at just 3.3 times forward projected sales. Taking the company’s strong growth into account, there’s a very good possibility that the stock is presently undervalued.
Where Sea Limited does present some risks, however, is in its expansive approach to the tech business. The young company has started business segments in everything from eCommerce to gaming in the space of only a few years.
As a result, the company may be trying to balance too many projects at once. This is likely leading to its steep losses and widening the gap between it and profitability. Nevertheless, it’s impossible to ignore both the potential market for Sea Limited’s services over the next decade and the massive growth it has posted so far.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.