When looking for a multibagger, a good place to start is with companies that have struggled but have reason to rebound. It’s important to look for signs of recovery in these companies’ recent earnings reports. And if there’s a trend of business picking up, now might be time to get in on the story.
I’ve found a clothing retailer you might associate with the mall, a provider of personalized fashion, and a company that puts you in a chef’s hat. These stocks could head much higher from here — even multiplying by five. Let’s check out these potential winners.
You may think of Express ( EXPR 3.83% ) as just one of the many stores in aging malls. But that’s not the case. Since 2019, Express has closed almost 100 stores, leaving it with more than 550 retail and outlet stores in the United States and Puerto Rico. It is also opening smaller stores called “Express Edit” in key high-traffic locations. The idea is that the clothing and accessories in each of these small-format stores is tailored to that particular market.
Express also has put the focus on e-commerce, connecting with potential shoppers online, and building strong relationships with customers. The company’s goal is to reach $1 billion in e-commerce by 2024 and says it is on track to reach this target. Express recently attracted about 450,000 viewers to its first livestreamed shopping event. And for the fiscal year that ended in January, e-commerce demand increased by 32%. The company is seeing success in both e-commerce and in-store shopping. It now has more active loyalty program members than ever before. And Express reported both a 55% gain in revenue and positive operating income for the full year.
If Express stock hits 5x growth, it would trade around $15 per share and the market cap would be $1 billion. At that level, it would still have a smaller market cap than peers Gap and American Eagle Outfitters. These companies recently posted full-year revenue growth of 21% and 33%, respectively, less than Express’ increase.
Express shares are trading for about $1 less than Wall Street’s lowest share-price forecast. If Express can keep growth going at today’s pace, there’s clearly room for the stock to climb.
2. Stitch Fix
Speaking of fashion, Stitch Fix ( SFIX 6.79% ) is another possible winner. There are two ways to shop at Stitch Fix. The first is Stitch Fix’s main “Fix” offering, which involves a stylist preparing a bespoke fashion selection to ship to you. The second is a newer offering called “Freestyle.” Through Freestyle, you bypass the stylist, but you answer questions about your style. Then the website shows you fashion you’re likely to like. Stitch Fix launched Freestyle in September.
Stitch Fix’s latest earnings report wasn’t particularly bright. The company said its onboarding process for Freestyle created some confusion among customers looking for the Fix offering. Stitch Fix says it is making improvements that should solve this problem.
Now, here are the reasons to be positive about Stitch Fix: Even against this backdrop, Freestyle revenue climbed 29% in the most recent quarter. And customers are spending more on the platform; revenue per active client surpassed $500 for the third straight quarter, putting the figure at $549, an increase of 18% from the year-earlier period.
Let’s talk about share price potential. If Stitch Fix stock increases by five, it would land at about $45 per share, where it was in August 2021, and its market cap would be $4.5 billion.
And today, Stitch Fix has the Freestyle opportunity, which opens it up to a much broader audience. Freestyle represents a total addressable market that’s two to three times larger than the Fix business, the company says. Once Stitch Fix irons out the wrinkles, revenue could take off and the share price may follow.
3. Blue Apron
Meal kit maker Blue Apron Holdings ( APRN 1.37% ) has suffered in recent times due to competition. That isn’t going away, but Blue Apron aims to focus on certain points that may help it stand out from the rest. Key elements driving growth are high-quality ingredients and a broad menu selection. Blue Apron also is putting the focus on customization and flexibility. For example, you can buy certain special-occasion products whether you’re a subscriber or not.
Blue Apron’s most recent fourth-quarter revenue is best compared to the fourth quarter of 2019 — prior to the pandemic. In this comparison, revenue climbed 13%. And important metrics like average order value, orders per customer, and average revenue per customer all increased.
If Blue Apron stock grew to five times it current level, it would trade around $18 per share and its market cap would be $596 million. That would be well below Blue Apron’s earliest market value — at the time of the initial public offering in 2017 — when it topped $1.8 billion. CEO Linda Findley calls this year “transformational” for the company. Of course, Blue Apron still is reporting a loss and must prove that it can hold onto market share over time. But if the company can continue to keep customers coming back and spending more, Findley may be right.
Will these three stocks become multibaggers this year?
These stocks could see big growth this year if things work out the way the companies plan, but many elements could prevent that from happening. These companies could report slower-than-expected revenue growth, for example. Or a market downturn could push investors toward safer stocks. Another scenario is this: These stocks may be multibaggers — but over a period of a few years. It’s important to remember that these picks are high-risk because they depend on business truly recovering and market sentiment toward risky investments being positive. That means these stocks are best left to aggressive investors. (Or, if you’re more cautious, consider a very small position.)
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.