Nearmap Ltd (ASX: NEA) and PolyNovo Limited (ASX: PNV) are the newest additions to my growth share watchlist. If you had held these 2 stocks since the beginning of the year, you would have seen a healthy growth in your portfolio of 167%.
Here’s why they’ve been skyrocketing, and what could be in store in terms of future growth.
Nearmap is an aerial technology and location data company. It utilises plane-mounted cameras to deliver high-resolution images at a high frequency, allowing companies to save time by allowing site visits to be conducted digitally. Nearmap’s customers span across industries including insurance, government, utilities and construction.
In the year-to-date, the company’s stock price has pushed 71% higher, closing at $2.61 last Friday. Overall, this is a fantastic market-beating result. However, Nearmap’s share price has struggled to stay afloat this year, plummeting 38% since its June peak.
As with most unprofitable growth-stage companies, slightly missing investor expectations can send shockwaves through a company’s market capitalisation. It’s hardly a surprise that Nearmap’s stock price stooped lower as investors grew impatient. Nevertheless, the company’s earnings results were still quite strong, hence why I think this 38% discount to the Nearmap share price is looking promising for October.
Nearmap’s annual contract value (ACV) increased by 36%, bringing total ACV to $90.2 million. This helped its bottom-line grow, with earnings before interest, tax, depreciation and amortisation (EBITDA) being bumped up 216% higher to $15.5 million. It also reported a healthy balance sheet, with a cash balance of $75.9 million.
As we look towards 2020, the company’s growth potential looks promising. According to a report by Geobuiz, the total addressable global market for aerial imaging is expected to hit $14.2 billion by next year. Given Nearmap’s year-on-year revenue numbers grew 78% in geographies like North America, the company looks to have a strong defensible proposition on a global scale.
PolyNovo is a company that operates in the health sector. It designs and manufactures dermal regeneration solutions internationally. In the year-to-date, the company’s stock price has risen a whopping 263% to close at $2.18 last Friday.
While this biotech company opened shop in 1998, it has recently been in the limelight for its flagship product, NovoSorb BTM. NovoSorb BTM is a skin supplement that uses polymer technology to treat dermal ailments like ulcers and partial and full wounds. This product grew in sales by a stellar 435% in FY19.
Another important figure to note is PolyNovo’s net loss after tax. This figure dropped to just $3.19 million from $5.97 million the year prior. The company expects that it will break even next year with excess cash flow still being invested into its growth.
PolyNovo currently operates in the US, Australia, New Zealand, UK and Ireland. It is looking into expanding into Asia, with expansion plans to Singapore, India and Malaysia well underway. It also has new products in development including devices for hernia and breast repair.
The company is also spending heavily on research and development, with more than 30% of revenue being allocated towards continued innovation. This figure is about 10% higher than the average for companies operating in the healthcare industry.
It seems to me that PolyNovo has a clear path to profitability and is investing heavily into some exciting products in its pipeline. This will definitely be a biotech to watch as it scales aggressively across the globe in 2020.
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Audrey Thehamihardja has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Nearmap Ltd. The Motley Fool Australia has recommended Nearmap Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.