Investors wait years to achieve a 1,000% gain. Some stocks never reach that benchmark. However, a recently-listed technology company seems to have overshot that threshold in less than 12 months.
Fellow Fool contributor Vineet Kulkarni uncovered NexTech AR Solutions (CSE:NTAR) last week and I believe this could be the underrated tech star investors have been waiting for.
NexTech’s stock is up a jaw-dropping 1,260% since July, 2019. In fact, it’s up 400% this year alone. The stock chart looks like one of Elon Musk’s SpaceX rockets in ascension. Savvy investors who spotted it early are sitting on incredible gains. However, there could still be more room for growth, considering this firm’s industry and technology.
Here’s a closer look.
Augmented reality shopping
With the spurt in online shopping, it was only a matter of time before technology leaders tried to differentiate their online shopping platforms. NexTech develops augmented reality content that adds an extra layer of interaction to online product listings. This enhances the experience for the customer and differentiates the shop’s brand from all the boring, static websites out there.
The company’s AR solutions are already compatible with major e-commerce platforms such as Shopify, WordPress, and Magento. With these platforms quickly expanding across the world, NexTech’s platform should see immense traction in the years ahead.
Meanwhile, the team has also entered the virtual events and conferences industry. Its NexTech’s InfernoAR is considered a cutting-edge augmented reality event platform that can host up to a million remote viewers concurrently.
If physical distancing measures persist while we deal with this pandemic, NexTech’s solution could reinvigorate the flailing events industry.
The prospect of revolutionizing the events and online shopping experience is genuinely exciting. These are multi-billion dollar industries growing by the double digits every year. However, it seems investors have already caught onto the excitement.
Stock valuation
NexTech’s stock surged from $1.80 to $7.60 over the course of 2020. Now the company’s market value ($600 million) is 60 times greater than its expected annual revenue. In other words, the stock trades at a price-to-forward-sales ratio of 60.
That valuation is on par with Shopify. However, unlike Shopify, NexTech doesn’t have a robust track record and millions of users across the world. It’s still a nascent company in an unproven industry with a long journey ahead of it.
Given its size and the inherent risks of cutting-edge technology, I believe the stock’s valuation is overblown. NexTech seems to be priced-to-perfection. However, investors may have better chances to enter if the stock corrects or if the technology starts gaining mainstream attention and traction.
For the moment, keep this on your “hyper-growth” watch list.
Bottom line
Online shopping is obviously accelerating during the lockdown. NexTech’s augmented reality platform could add another layer to the online experience. I believe demand for this technology could be immense as e-commerce giants struggle to set themselves apart from the competition.
NexTech’s stock has already delivered immense gains. There’s plenty of room for growth ahead. However, the stock is currently priced-to-perfection. Cautiously optimistic investors should keep this one on their radar.
