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These 2 Stocks Could Double From Here, But for Different Reasons

Daniel Foelber, The Motley Fool
·4 mins read

Equipped with a bass drum and fashion-forward sunglasses, the pink Energizer Bunny is one of the most iconic, recognizable, and hilarious corporate mascots. And the bunny is just one of the many reasons to get excited about Energizer Holdings (NYSE: ENR).

Meanwhile, Virgin Galactic (NYSE: SPCE) is poised for supersonic growth as it hopes to define a new era of space tourism. With its stock down over 20% in the past month, there's now a cheaper way to get onboard.

Fasten your seatbelts and prepare for launch, because takeoff for Energizer and Virgin Galactic stocks could be just around the corner.

Two USD hundred dollar bills.
Two USD hundred dollar bills.

Image source: Getty Images.

1. Energizer Holdings

Aside from the core Energizer brand, Energizer Holdings owns a variety of other battery and portable lighting brands, like Rayovac and VARTA, as well as several automotive brands that cover headlights, car batteries, car fragrances, and more.

Over the past five years, Energizer has done an impressive job at growing revenue, free cash flow (FCF), and earnings, partly thanks to some key acquisitions and synergies.

FY 2016

FY 2017

FY 2018

FY 2019

Estimated FY 2020

Net sales

$1.63 billion

$1.76 billion

$1.80 billion

$2.49 billion

$2.72 billion
to $2.74 billion

Adjusted FCF

$172.3 million

$203.5 million

$237.8 million

$256.2 million

Less than
$300 million

Adjusted EBITDA

$314.0 million

$388.6 million

$399.1 million

$545.5 million

$575 million
to $585 million

Adjusted EPS

$2.31

$2.98

$3.37

$3.00

$2.45 to $2.55

Data source: Energizer Holdings, Table By Author.

Even with the COVID-19 effect, Energizer expects year-over-year (YoY) 2020 revenue growth of 9% to 10% and adjusted FCF to exceed $300 million. So far this year, Energizer has raked in over $240 million in FCF, which is around four times the amount of dividends paid on common stock -- indicating that the company's dividend is affordable and healthy. Energizer yields 2.5% at the time of this writing.

Energizer has posted five years of solid numbers. And with plans to grow FCF to over $400 million in fiscal year 2022 and a market capitalization of around just $3 billion, Energizer's size, track record, and guidance give it some nice upside potential.

2. Virgin Galactic

With a first-mover advantage into space and supersonic travel, Virgin Galactic is one of the most intriguing industrial stocks on the market today. But unlike Energizer, Virgin Galactic is more of a concept than a company. Its recent quarterly loss of $0.30 per share and zero revenue may seem strange given its near-$4 billion valuation, especially when compared to a similar-sized company that actually makes money.

Virgin Galactic's value comes from the fact that it is attempting to enter and potentially define a completely new industry. It sees a total addressable market of around 2 million high net worth individuals who could be interested in taking a $250,000 trip into space. In terms of the near future, the company plans to fly founder Sir Richard Branson into space in the first quarter of 2021 before it begins taking customers onboard. Its Space Act Agreement with NASA is a move "to advance the United States' efforts to produce technically feasible, high Mach vehicles for potential civil applications" and is one of many partnerships that Virgin Galactic has with established companies like Boeing and Rolls-Royce.

Next year could be a big year for Virgin Galactic. Given this new industry's high barriers to entry and lack of competition, successful flights into space could spark a surge in demand and a backlog of bookings that could give Virgin Galactic a competitive edge for years to come.

The company is still priced based on future hopes, not fundamentals, so make sure you're comfortable with the risks before you invest.

Two ways to double your money

Energizer's strong results in the face of a challenging economy cap off what has been five years of regimented growth. The company's solid FCF and earnings growth, paired with a 2.5% dividend yield, make it a fundamentally strong way to invest in a mid-cap industrial stock.

On the other hand, Virgin Galactic could double your money if the gap between its reality and its vision continues to close. And if the space tourism industry proves to be truly profitable with Virgin Galactic as the market leader, then a double could be just the beginning.

More From The Motley Fool

Daniel Foelber owns shares of Virgin Galactic Holdings Inc. The Motley Fool owns shares of and recommends Virgin Galactic Holdings Inc. The Motley Fool has a disclosure policy.

These 2 Stocks Could Double From Here, But for Different Reasons was originally published by The Motley Fool