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Does Profit Even Matter? Investing Ideas from the Not So Secret Candy Crush IPO

But you also need a pretty high return in order to incentivize investors toward IPOs, which are pretty risky investments. The public doesn't know much about these new stocks, and they don't have a proven track record. 

Investing Ideas

We decided to take that list of stock IPOs with the biggest pops on their first day of trading, and screen it for those already profitable early in 2014. Of the list of 15 companies, only two, Noodles & Co (NDLS) and Sprouts Farmers Market (SFM) have actually turned a profit. And they were slim ones, at 1.3% and 2.7% respectively. 

So we expanded our screen by looking instead at operating margin. Operating margin is similar to profit margin, in that it looks at the ratio between costs and sales. But it doesn't account for fixed payments like interest on debt. 

Just five of 2013's IPOs with day-one pops above 15% remained on our list, with operating margins above 1%.

Click on the interactive chart to view data over time. 

1.Cvent, Inc. ( CVT):A cloud-based company, provides various solutions for events and meetings value chain primarily in North America. Market cap at $1.15B, most recent closing price at $38.88.

Pop: 56.8%

Operating Margin: 1.3%

 

2.Tableau Software, Inc. ( DATA):Provides various business analytics software products in the United States, Canada, and internationally. Market cap at $5.79B, most recent closing price at $97.93.

Pop: 63%

Operating Margin: 1.6%

 

3.Noodles & Company ( NDLS):Develops and operates fast casual restaurants. Market cap at $1.11B, most recent closing price at $37.82.

Pop: 104%

Operating Margin: 3.1%

 

4.Potbelly Corporation ( PBPB):Owns and operates Potbelly Sandwich Works sandwich shops in the United States. Market cap at $96.74M, most recent closing price at $22.66.

Pop: 119%

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