Tech trio: Shutterfly, Sourcefire and LogMeIn
These companies are targeting profitable and fast-growing market niches within the technology sector.
By Andy Obermueller, Fast-Track MillionaireIn my latest screen, I looked for profitable and debt-free U.S. companies with a market cap of $900 million to $1 billion.
Here's a look at three technology stocks that made my final list: Shutterfly (SFLY), Sourcefire (FIRE), and LogMeIn (LOGM).
Shutterfly is a website that lets users print photos as paper photographs or include the images on a variety of items, like coffee mugs and calendars.
Its business is highly cyclical, as you can imagine, with the December holidays accounting for the lion's share of the revenue. Even so, the year-over-year top-line is impressive, at 58.7% from 2010 to 2011.
The company does nicely on the bottom line as well, at 13.3%. The growth and profitability show up right where they should: In the shareholder equity line on the balance sheet, which has doubled in the past year.
The kicker is that not only is this company debt-free, it's asset rich. It has $180 million in cold, hard cash. Look for it to deploy this capital with robust advertising, business expansion and, potentially, acquisitions. This company is a strong long-term play. I like it at its current price.
Sourcefire is a network defense company. This is a sector that many are predicting strong growth in as more and more companies seek to safeguard the data stored in their computers.
Sourcefire has a nice top-line growth trend that amounts to a 30.5% compound annual growth rate and a smokin' high price-to-earnings ratio.
The intrusion prevention market was about $1.5 billion in 2010 and is projected to grow to $2.1 billion in 2014. Sourcefire has what looks like an 8% market share, so it can continue to grow indefinitely.
One reason to be confident in that is the company's history. It was founded by Martin Roesch, a bona fide computer genius who wrote the protocol for intrusion detection. (It's called Snort.)
Roesch has now built a commercial version of the software in response to industry demand and it is clearly a leader. There's nothing not to like about the company's financials. Its industry position is strong, too. I like this company for a multi-year holding period.
LogMeIn has software that lets you access your computer remotely. It's very good technology that addresses a real need in today's world -- mobility.
In the old days, I went into the office; now, my workplace is everywhere, which affords me far more flexibility while also cutting costs for the company. More and more companies are discovering this win-win approach.
And LogMeIn, with a 21% net margin and a 55% compound annual growth rate, is clearly taking a leading position in filling the need. Long-term prospects are favorable. This is a great company for a growth portfolio.
Related articles:
- Free cash flow favorites in technology
- S&P's trio of info tech ETFs
- Tech favorites: CSCO, MSI and QCOM
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