A component of Sir Isaac Newton’s first law of motion is that an object in motion tends to stay in motion at the same speed and direction until acted upon by an unequal force. That doesn’t apply to stocks, which can and do fluctuate on a daily basis.
Yet sometimes stocks of companies with good business prospects do keep to a general course, and though there may be ups and downs, their trajectory seems to remain upward. That’s what three Motley Fool contributors believe is the case with…
The Trade Desk benefits from the second wave of digital advertising
Jamal Carnette, CFA (The Trade Desk): Unless you’ve been living under a rock, you understand advertising is amid a generational shift. Traditional channels like television and print media are under strain from digital mediums, making investors in Alphabet and Facebook millions. Despite the duopoly in digital advertising, you’re not too late to the party, because The Trade Desk has a long runway for growth.
Despite the medium shift, little else has changed: Brands are constantly looking to collect better data on potential buyers and ensure ads are placed appropriately to take advantage of this data. The Trade Desk’s programmatic ad buying system allows this to occur in real time, increasing the efficacy of ad spending. The combination of a shift to digital advertising and programmatic delivery will continue to boost The Trade Desk’s top line.
Shares of the company have doubled this year on account of a strong first-quarter report that included 41% revenue growth. More importantly, customer retention was above 95% during the quarter, the company’s 22nd in a row. If you were late to the party and missed the shift to digital advertising, The Trade Desk is a way to take advantage of the second growth wave in the industry.
A double-double with room to grow
John Bromels (Cintas): Double? Phooey! Uniform rental specialist Cintas has seen its shares more than quadruple over the last five years. And the best part is, the company — which has been turning itself into a one-stop shop for numerous business services — still has plenty of room to grow.
Cintas’ model for uniform rental is simple: It sends a delivery van or truck to the business location of a client, picks up soiled uniforms, drops off clean ones, and moves onto the next one. This process is usually cheaper and easier for clients than attempting to maintain laundry facilities on site. As the unemployment rate has fallen, a larger North American workforce has meant more uniforms to rent, plus the company has been successful in attracting new clients.
This success was on display in the most recent quarter, Q1 2019, when the company’s uniform rental and facility services segment logged organic growth of 6.8%. Wait a minute: facility services? Yep: Cintas long ago realized that its delivery vans could transport more than just uniforms. Cintas rents floor mats and does restroom restocking as well. The company has even branched out into first aid kit restocking and fire and safety equipment monitoring, a segment that’s growing even faster than uniform rental, with a 10.7% growth rate in the most recent quarter.
It’s true that a recession or other event that causes the unemployment rate to tick upward would be a major setback for Cintas. But with the U.S. economy still humming along and unemployment remaining low, things are still looking pretty good for North America’s largest uniform renter…
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