Companies have plenty of ways to grow. Most companies look to grow internally, by building up a larger customer base or increasing their offerings to existing customers. Others grow externally, buying growing competitors or related businesses.
The best companies usually do a mix of both. A major acquisition can immediately create a new suite of products, and instantly grow the customer base. The trick? To find companies that can execute on their acquisitions well.
For instance, in the financial space, brokerage Robinhood (HOOD) is increasing its options trading services, and has acquired WonderFi, a digital asset company. This expands the company’s offerings while making its customer base more global.
This can help Robinhood continue on its strong growth trend, including a 50% increase in revenues over the past year, and a massive 114% earnings growth rate.
Action to take: With a hefty 50% profit margin on top of its rapid growth and increasing acquisitions, Robinhood shares look poised to break to new all-time highs.
Momentum investors may like shares here, especially as Robinhood continues to grow in popularity among younger investors on top of its growth-through-acquisition strategy.
For traders, the September $75 calls, last trading for about $5.65, could see mid-double-digit returns in the months ahead from a further rally.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.