Investing in cryptocurrency has been popular over the past year as Bitcoin has surged to record highs. But even if you are bullish on digital currencies, you would be taking on significant risk by investing in Dogecoin, which is highly speculative and volatile — even for cryptocurrency. In just the past month, it has lost one-third of its value while the S&P 500 has risen by more than 3%.
Stocks like Veeva Systems (NYSE:VEEV), Starbucks (NASDAQ:SBUX), and Netflix (NASDAQ:NFLX) are far from cheap, but they are still much more tenable investments than Dogecoin. Given their proven business models and still plenty of growth opportunities ahead, if you are willing to be patient with these stocks, you can earn a great return over the long haul. With Dogecoin, that’s not nearly as likely.
1. Veeva Systems
Healthcare companies aren’t known for being terribly tech-savvy. While they may provide great health-related products and services, they can lack the efficiency and tech capabilities to make their operations run as smoothly as possible. That’s where Veeva comes in. The company offers two subscription products: Veeva Vault and Veeva Commercial Cloud. The former provides life sciences companies with applications for managing content and data, while the latter focuses on data analytics solutions. Subscription-related revenue from these services accounts for close to 80% of Veeva’s top line, while professional services make up the remainder.
In the first quarter of fiscal 2022, the company added 59 customers during the period ending April 30 — a record for the business. Its revenue of $434 million grew by 29% from the same period last year. For the current fiscal year (which ends Jan. 31, 2022), Veeva projects that its top line will come in at about $1.8 billion — a year-over-year increase of more than 23% from fiscal 2021’s less than $1.5 billion.
The only downside is the stock’s price-to-earnings (P/E) multiple of more than 120. It’s an obscene price tag given that the average holding in the SPDR S&P 500 ETF Trust trades at just 26 times its profits. However, over the long term, as more businesses go digital and as Veeva adds more clients, that earnings multiple will come down. While it isn’t a cheap stock to buy today, Veeva can still prove to be a good long-term investment.
Another stock that is trading at an incredibly high earnings multiple, Starbucks, is at a P/E of 140 right now. However, a tough pandemic year has made that ratio look a lot worse than it will in the future; based on analyst projections, the stock’s forward P/E is a lot more reasonable at 39. Nonetheless, that’s a hefty price tag for a business that typically doesn’t generate much year-over-year growth. In fiscal 2019, sales of $27 billion were up just 7% from the previous year.
But one of the reasons I’m optimistic for the future of the company is that it is focusing on stores that focus primarily on pickup and/or drive-thru options — in other words, stores that have no seating. The company calls the drive-thru its “most productive model,” one that consumers should expect to see more of in the future. While the business isn’t abandoning its traditional storefronts, it is placing more of a focus on convenience. At its drive-thrus, it is deploying handheld point-of-sale devices to improve that process and maximize throughput. This will help strengthen margins which, in turn, could lead to greater profitability down the road.
Prior to the pandemic, the company’s net margin was a solid 14%, and improving that will only make the business a much better buy over the long haul. It also makes expansion a lot more likely to bring about better results right from the start. Last month, the company announced that it would be expanding to Barbados — its 10th Caribbean market.
Starbucks may not be a high-growth stock, but if it can strengthen its bottom line, even today’s hefty valuation could prove to be a bargain years from now when its margins are much stronger.
Netflix trades at the lowest P/E on this list, but at more than 60, it too isn’t a cheap buy. The company spends significantly on content, but there’s one great trend for investors to love about the business: Its profits have been steadily improving over the years. From just a 2% net profit in 2016 to more than 14% over the trailing 12 months, the company has been strengthening its gross margin while also spending less on selling, general, and administrative costs (as a percentage of revenue) to bolster its bottom line.
Equally impressive, the business is still generating solid numbers. In its most recent earnings report, released April 20, it beat expectations for both earnings and revenue. Sales of more than $7 billion for the period ending March 31 were up 24% year over year even as the company faced growing competition from Disney and Comcast, the latter of which launched its streaming service, Peacock, last year.
While investors may be down on a decline in subscriber additions (Netflix’s net subscriber additions of 3.98 million last quarter fell short of the 6.2 million analysts were expecting), what’s important is that Netflix’s top and bottom lines are improving. In addition, management believes the underwhelming subscriber numbers could be due to the pandemic, which has led to a delay in releasing more content.
Either way, Netflix is still a household name, and it’s proving to be a dominant force in the industry even as competition ramps up, which is a great sign. It’s not a cheap investment — but it’s much more of a sure thing than Dogecoin.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.