With the recent market volatility, many people have seen their investments take a big hit as more and more negative international news stifles any potential breakouts.  While indications are pointing to a potential market correction, or even an earnings recession in the near term, it would make sense to look for stocks that have a limited downside with large potential upside growth possibilities.  

One sector that is in the top 16th percentile of all 257 sectors, and has several inexpensive growth companies is the Internet Service Delivery sector.  The internet service sector marries retail and advanced computer technology.  This can range from retail websites that have thousands of items, to a job recruiting site that utilizes advanced technology to match the best job for each candidate.  These internet advances streamline functionality and intelligent search options.  And as the world moves more and more into cyberspace for almost every want and need, the internet service sector is a growing to meet those needs.

Stocks To Consider

Even though there are increasing worries about the Chinese growth levels, there is one such internet service delivery company that is growing during these volatile times – Vipshop Holdings (VIPS - Snapshot Report).  Vipshop is a leading online discount retailer for brands in China. The Company offers high quality and popular branded products to consumers throughout China at a significant discount from retail prices. As compared to conventional on-line marketplaces or large-scale multi-category online retailers, Vipshop has successfully created and proven there is a third e-commerce model that can provide tremendous scale and profitability. The Company has pioneered the online discount retail model in China and become the expert and leader.

Over the past seven quarters, this Zacks Ranked #2 (Buy) company has met or exceeded the Zacks Consensus Earnings Estimate, and has beaten the Zacks Consensus Revenue Estimate.  Specifically, in their most recent quarter, Vipshop’s revenue growth was 77.6% y/y, and non-GAAP operating income grew 113% y/y.  Also, management’s guidance for Q3 15 is expecting revenues to grow 71% y/y!

As you can see from the graph below, expectations for 2016 are almost double the current price.  

Another Internet service delivery company is Monster Worldwide Inc. (MWW - Analyst Report).  Monster Worldwide is the online recruitment leader and the parent company of Monster, the leading global careers website. Headquartered in New York, Monster Worldwide is also the world's largest Recruitment Advertising agency network, the world's largest Yellow Pages advertising agency and a provider of direct marketing services.

Recently, this Zacks Ranked #2 (Buy) company began to divest itself of international business operations in order to increase their focus on the North American (US) market.  This entailed the sale of their stake in JobKorea which will allow the company to execute their capital allocation strategy.  This includes improvements to their backbone technology which will enhance the quality and overall user experience.  Further, Monster’s 6Sense search technology, and Monster’s Career Ad Network are examples of their focus on technology to better the user’s experience.

The graph below shows the expectations for 2015 and 2016.  As you can see, this company is expected to triple their current price level by 2016.      

Our third company in the internet service delivery sector is CafePress Inc. (PRSS - Snapshot Report).  This company provides an e-commerce platform empowering individuals, groups, businesses and organizations to create, buy and sell customized and personalized products online. The Company's portfolio of brands includes CafePress.com, Canvas On Demand, ImageKind, CafePress Pro, and Canvas On Demand Pro. It markets its services worldwide.

After a few years of difficult times, this Zacks Ranked #1 (Strong Buy) company posted their first EBITDA positive non-peak quarter in more than two years for Q2 15.  The company was able to post a contributing margin of 29% which represents a y/y improvement of 1,300 basis points.  According to CEO Fred Durham, “We are unlocking the strength of the core CafePress.com business.  The core business has quickly surpassed the bottom line results of the more complex company that we had last year and we are very excited for the future.”

As you can see from the graph below, current expectations for 2015, and 2015 are almost double of the current price.

Bottom Line

Currently, all of these stocks are trading below $18, and have a Zacks Growth Style Score of A.  Therefore, these are all relatively inexpensive companies that exhibit all the best signs of a growth company. Given the consensus earnings estimates for the remainder of 2015, and through 2016, all three of these internet service delivery companies have limited downsides coupled with large potential upside growth possibilities.  

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