The two most well-covered initial public offerings of 2017 have been major flops. Snap Inc (NYSE:SNAP) went public in early March at $17. After an early pop, SNAP stock soon dipped below that level, dropping below $12 before a recent recovery.
Blue Apron Holdings Inc (NYSE:APRN) has performed even worse. APRN stock dipped below its $10 IPO price in just its second session — and that was after the initial range was slashed from an expected $15-$17. APRN stock has gone basically nowhere but down, losing nearly half of its value in a matter of weeks.
The struggles of the two headline-garnering offerings has given rise to complaints that the IPO market isn’t healthy, or that venture capital owners are bringing increasingly weak companies to the public markets. But the failures (so far) of APRN and SNAP doesn’t mean all recent IPOs are doomed to fail.
In fact, here are three companies that went public this year that still have upside from current levels.
IPOs That Will Clobber Snap and Blue Apron: Gardner Denver Holdings (GDI)
Pump and compressor manufacturer Gardner Denver Holdings Inc (NYSE:GDI) is about as far from Snap and Blue Apron as a company can get. Gardner Denver was founded not this decade, but in 1859. It’s a name unknown to most investors, but its brands, including namesake Gardner Denver, Drum, Nash and Air Drive, are well-known and well-respected in its industries.
GDI went public in May for the second time. KKR & Co. L.P. (NYSE:KKR) took Gardner Denver private in 2013 for $3.7 billion. A current price of $23 suggests a moderately higher valuation of about $4.5 billion in market cap, and over $6 billion, including the company’s debt load.
That might sound like a major jump — particularly given that GDI’s profit has declined. Adjusted EBITDA was $537 million in 2014; it has guided to just $510-$530 million this year. But that figure suggests roughly 30% year-over-year growth, thanks to a continuing rebound in energy demand, which peaked in 2014 and has fallen steadily since.
A callout this weekend in Barron’s has given GDI a boost. And as that outlet pointed out, GDI still trades at a nice discount to peers including Graco Inc. (NYSE:GGG). Should that gap narrow, GDI could have as much as 40% upside. Even if that’s too much to ask for, GDI still looks like one of the more attractive industrials in the market, particularly as investors catch on to the story here.
IPOs That Will Clobber Snap and Blue Apron: Appian Corp (APPN)
Appian Corp (NASDAQ:APPN) actually has been one of the best-performing IPOs of 2017. APPN stock has gained nearly 75% from its $12 offering price. And there may be more upside ahead.
APPN stock isn’t cheap. Like a lot of early-stage tech companies, Appian remains unprofitable. Its loss actually expanded in the second quarter, as the company ramped up spending on sales and marketing and research and development. And APPN trades at nearly seven times revenue on an enterprise basis.
But early-stage software stocks aren’t cheap. And Appian has an intriguing story. It offers a “low-code” platform for companies to develop in-house applications. It’s shifting toward a subscription revenue model, as opposed to offering lower-margin consulting. Revenue is guided up 22-23% this year, including 34-35% growth in subscription revenue.
Again, APPN does look expensive. But other SaaS plays like Veeva Systems Inc (NYSE:VEEV) and Paycom Software Inc (NYSE:PAYC) have grown into similarly steep valuations — and beyond. Appian has a huge market opportunity, and it is moving toward market leadership, if not outright dominance. If that continues, APPN should continue to grind higher.
IPOs That Will Clobber Snap and Blue Apron: Jeld-Wen (JELD)
Jeld-Wen Holding Inc (NYSE:JELD) performed very nicely after its January IPO, rising from a $23 IPO price in January to nearly $35 by June. Since then, however, concerns about a slowing housing recovery in the U.S. have brought JELD stock back to Earth. JELD has fallen by about 18% since its peak roughly two months ago.
The pullback presents an opportunity. Jeld-Wen has exceptional share in both doors and windows. It trades at a discount to peer Masonite International Corp (NYSE:DOOR). Energy-efficiency legislation (and cost savings) should help window sales worldwide, in particular in Europe, from where Jeld-Wen derives 30% of total revenue.
JELD stock remains cheap as well, trading at less than 14x 2018 analyst EPS estimates. With revenue and earnings both growing, and plenty of room to run in the housing recovery both here and abroad, that multiple looks too low. JELD looks like an attractive opportunity at these prices, particularly for investors expecting an acceleration in U.S. and European housing.
As of this writing, Vince Martin did not hold a position in any of the aforementioned securities.
