Some stocks are capable of generating above-average returns even when they’re well-known. FAANG stocks are a good example of this. However, if you want to increase your chances of finding multi-bagger stocks, you’re better off looking in places that…
Wall Street hasn’t yet. These are often small-cap stocks that the industry experts have dismissed, forgotten about, or simply overlooked. The great thing about these stocks is that once they start doing well, they tend to attract attention from professional investors, which can supercharge their returns.
Keep reading to see three hot stocks that are still under Wall Street’s radar.
Carparts.com (NASDAQ:PRTS) has been around since the early days of the internet, but for most of its history it was an underperforming online auto parts seller named U.S. Auto Parts Network. That’s changed in the last couple of years with a new management team, and a turnaround strategy that streamlined the business under one brand and added new distribution centers to speed up delivery and expand inventory. The company also changed its corporate name to Carparts.com last year.
The recent results speak for themselves. Last year, revenue jumped 58% to $443.9 million, and adjusted EBITDA increased from $4.5 million to $16 million. In the first quarter of 2021, that momentum continued with revenue climbing 65% to $144.8 million.
The company has benefited from the e-commerce boom during the pandemic, as well as elevated sales across the auto parts industry due to rising prices for both new and used vehicles and the boon of stimulus checks. Demand has been so strong that the company is struggling to keep up, as it is currently filling its new distribution center in Texas and expects to add one or two more in the next couple of years.
Carparts.com is forecasting long-term revenue in the 20% to 25% range and an adjusted EBITDA margin of 8% to 10%. Over the near term, it should continue to benefit from tailwinds in the auto parts industry, as the chip shortage is likely to affect auto manufacturing for at least the rest of the year.
The stock is covered by only a handful of analysts and trades at a price-to-sales ratio of just 1.5, which looks like a bargain considering its growth rate.
2. Children’s Place
One of the most overlooked comeback stories of the pandemic has been Children’s Place (NASDAQ:PLCE), which has jumped nearly 1,000% since its bottom last spring.
The omnichannel children’s apparel chain was hit hard by the pandemic, but now appears to be thriving. In its first-quarter earnings report, the company posted adjusted earnings per share of $3.25, a quarterly record for the company, and trounced the analyst consensus at $0.06, showing Wall Street has essentially been asleep on the recovery story. Revenue in the first quarter was 5% above 2019 levels even as it had 27% fewer stores, which shows that the company is operating as efficiently as it ever has and that its store optimization strategy is delivering the desired results.
In fact, Children’s Place used the pandemic to accelerate that strategy, closing down more stores and shifting sales to its e-commerce channel, which produces higher margins. CEO Jane Elfers said that e-commerce sales had reached 50% steady-state penetration, showing the company is as much an e-commerce company as a brick-and-mortar retailer.
Even better, Children’s Place should benefit from a number of tailwinds over the rest of the year. It usually makes the bulk of profits in the second half of the year from the back-to-school and holiday seasons, and this year it will benefit from children returning to school in the fall, a need to…
Continue reading at THE MOTLEY FOOL