Companies that are disrupting the status quo can sometimes be stellar investments. Well-known disruptors like Netflix and Amazon totally changed the way consumers watch movies in their homes and shop for everyday goods. If you had invested in this duo a decade ago (and held), you’d have more than 40 times your original purchase today.
But picking the winners from a host of mediocre players can be tough. We asked three Motley Fool contributors to recommend one disruptive company that could provide long-term market-trouncing performance. They came up with DataDog (NASDAQ:DDOG), Lemonade (NYSE:LMND), and Roku (NASDAQ:ROKU).
DataDog: This stock could be an investor’s best friend
Brian Withers (DataDog): Datadog stock has been on a rocket ride, more than doubling over the past 12 months. You might think you’ve missed this fast-growing stock, but this dog’s disruption story is still not over. The company specializes in monitoring the ecosystem of applications, networks, and security businesses use to execute their day-to-day operations and win over customers. Let’s look at why you might want to add this observability expert to your portfolio.
First, let’s dive into the most recent results. The top line grew an astounding 75% year over year. You might think that the Q3 of the previous year was a quarter with a weak result, but it is lapping solid growth of 61%, which makes the number even more impressive. But this isn’t the only thing that investors were excited about in the quarter. The company’s largest customers continue to grow at a massive rate. This is further emphasized with the more than doubling of its remaining performance obligations (RPO). RPO is a key metric for software-as-a-service companies and is the total value of all its contracts that have yet to be paid out.
But last quarter’s results aren’t all investors are excited about. The company announced numerous upgrades and additional tools in its DASH user and developer conference at the end of October. These enhancements will help the company bring more value to customers and encourage them to use more of the ecosystem of products. Today, 31% of customers use four or more products, up from 20% the same quarter last year.
With more companies adopting more cloud services, it’s making their information technology infrastructure more complex. DataDog becomes a must-have critical enabler for businesses to keep tabs on all their digital assets. Despite the stock’s high valuation (a price-to-sales ratio of 66), this disruptor is well positioned to beat the market over the next decade. You would be smart to pick up a few shares today.
Lemonade: The tech-driven insurer that could bring comprehensive gains
Will Healy (Lemonade): Lemonade utilizes tech to bring disruption to the insurance industry. Its renters, homeowners, auto, pet, and life insurance policies use artificial intelligence (AI) and behavioral economics to make coverage decisions. Through this process, it strives for zero paperwork and “instant everything.”
It also attempts to appeal to customers on a personalized level through the Lemonade Giveback program. If the company does not spend all the money set aside for claims, Lemonade donates funds to the charity of the customer’s choice. The program likely contributed to its Net Promoter Score of 70, far above the industry average of less than 20.
Lemonade’s information edge also gives it a competitive advantage, with Lemonade Car emerging as its latest AI innovation. It is a technology tied to car-mounted sensors that tracks…
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