3 Growth Stocks for Forward-Looking Investors
Danny Vena, John Bromels, and Demitrios Kalogeropoulos, The Motley Fool
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Spotting certain demographic, technological, or cultural shifts early can be a great way to boost your investment returns. The only constant is change, as the saying goes, and being able to spot those moves and invest accordingly is one way that forward-looking investors can take advantage of those inevitable changes and prosper from them.
With that in mind, we asked three Motley Fool investors to choose top companies that they believe are set to benefit from significant changes in consumer and business markets. They offered convincing arguments for iRobot Corporation (NASDAQ: IRBT), Netflix (NASDAQ: NFLX), and Cintas Corporation (NASDAQ: CTAS).
Man with binoculars looking to a distant horizon.
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Image source: Getty Images.
Let the robots do the cleaning
Demitri Kalogeropoulos (iRobot): Robotic cleaning devices are moving into the mainstream, which makes this a great time to consider picking up shares of the industry leader, iRobot. The Roomba maker had an excellent 2017 as sales jumped 34% to $884 million with help from a strong holiday-season outing for its newest round of vacuum models.
Fears of an influx of competition have pushed the stock lower lately. And those competitive threats are worth keeping an eye on, since they'll likely hurt iRobot's profitability over the short term. In fact, operating margin dipped to 8.7% of sales last year from 9.2% in 2016, and CEO Colin Angle and his team expect earnings to remain pressured until around 2020 , or about the time that the market leaders will become firmly established.
IRobot likely won't boast anything like its current 60% market share over the long run. But, if management is right about this industry's big-picture growth potential , and assuming the company continues pushing the robotic cleaning niche forward with design and functionality improvements, then iRobot should earn a significant chunk of a huge market. In the meantime, investors have good reasons to expect sales to cross $1 billion in 2018 to mark 20% growth over last year's impressive result.
A robotic vacuum cleaning a wooden floor next to a bed.
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Image source: iRobot.
A paradigm shift in viewing
Danny Vena (Netflix): It was little more than a decade ago that the bulk of television viewing was done on the networks' time schedule. People still gathered around the TV set at designated times to catch their favorite programs, but that decades-old dynamic has undergone a paradigm shift.
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Netflix first destroyed the model of the video store, allowing people to choose their movies and TV shows in advance and receive them in the mail in little red envelopes -- in the order of their choosing. The debut of streaming in 2007 not only succeeded in disrupting Netflix's own model, but sent the secular television and cable industries into decline.
The company now boasts 125 million subscribers worldwide, and with the stock gaining more than 900% over the last five years, you might think that train has left the station -- but I think Netflix is only getting started. 
The rate of global fixed broadband subscribers is still growing, and is expected to top roughly 1 billion by 2023. More enthusiastic estimates put that number even higher. If those figures are even close to accurate, the Netflix addressable market will continue to expand, and the company could grow its viewing base many times over from broadband customers alone. That disregards the fact that many of the company's customers will consume its content strictly from mobile sources -- which eliminates the need for wired broadband.
Netflix landing page for its original series Stranger Things.
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Image source: Netflix.
The company isn't stopping there. At an event last year, CEO Reed Hastings described a process developed by the company for adjusting the video compression rate to achieve incredible picture quality even with slower internet speeds, like those found in many developing countries.
The worldwide trend toward streaming shows no signs of slowing, and Netflix is best positioned to benefit from the cultural shift it pioneered just a decade ago.
You ain't seen nothin' yet
John Bromels (Cintas): You might not think that a uniform rental company would be "high growth." In that case, you don't know the nation's largest uniform renter, Cintas, whose shares have more than quintupled over the past decade -- and look ready to keep on growing as it benefits from current employment trends and a fractured domestic uniform-rental market. 
Cintas not only rents work uniforms -- the bulk of its business -- but also provides a motley collection of other business services including floor mat rental, fire and safety equipment, and restroom restocking. Demand for all these services increases as labor participation increases, and employment is up, particularly in the manufacturing, warehousing, healthcare, hospitality, and transportation sectors, in which work uniforms are common.  
Three auto mechanics in matching work uniforms.
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Image source: Getty Images.
For proof, look no further than the company's recently completed third quarter of fiscal year 2018. Revenue grew by 27% year over year, to $1.6 billion. Net income from continuing operations was up a jaw-dropping 152.9% year over year. While much of that was due to the one-time effects of tax reform, organic growth in the quarter was a healthy 8%. 
But don't be scared off by Cintas' past performance. The uniform rental market is highly fractured, which gives Cintas plenty of potential targets to acquire and continue its growth, and its P/E ratio is below that of its major competitor UniFirst. Cintas' growth engine looks like it'll be chugging along for years to come.
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