It sounds great in principle: Buy multi-bagger stocks that deliver life-changing returns. But is it possible in practice?
Investor Christopher Mayer wrote a book called 100 Baggers which attempted to quantify this question. He reviewed American stock market data back to the 1960s and found several hundred companies which delivered at least 100-to-1 returns in recent decades, meaning that a $10,000 investment would have turned into $1 million or more.
These aren’t get-rich-quick stocks; in the majority of cases, investors had to hold shares for a decade or more to get the 100x return. But it’s possible with good stock selection and patience to achieve jaw-dropping returns.
There were several unifying principles that tended to define successful multi-bagger investments. The companies tend to be fairly small at the start so they have room to grow; they tend to have durable competitive advantages, and they tend to have steady above average top-line growth. They also generally started out at reasonable valuations; the road to multi-baggers isn’t usually found in paying exorbitant multiples for momentum stocks.
Putting these pieces together, what companies look like they could be real multi-bagger stocks at today’s prices? Here are three leading candidates for your consideration.
Luminar Technologies (LAZR)
Luminar Technologies (NASDAQ:LAZR) an automotive technology company which provides laser imaging, detection, and ranging sensors (lidar) systems.
Lidar systems allow vehicles to observe the road around them and detect hazards. Analysts expect lidar solutions to be pivotal in the rollout of self-driving vehicles and robo-taxis. In addition, Luminar has an advanced technology and services segment which offers items such as pixel-based sensors and advanced lasers.
Electric vehicles, as a sector, had a rough 2023. With Tesla (NASDAQ:TSLA) stock slumping, investors have thrown in the towel on a lot of suppliers to the industry, such as the lidar players. Luminar, for its part, has seen its stock tumble 75% over the past year.
Luminar is unprofitable, and it could take a while for the firm to scale to profitability. It has, however, grown revenues from $13 million in 2019 to $70 million in 2023. This is the sort of rapid adoption curve that is common in successful multi-bagger stocks. Will Luminar be able to put the pieces together and build a massive business? Time will tell. At this depressed price, regardless, it is set up for tremendous upside on any good news.
Payoneer Global (PAYO)
Payoneer Global (NASDAQ:PAYO) is a FinTech company that operates primarily in the payments and payroll management space. The company allows clients to seamlessly pay employees and contractors in a variety of different countries and currencies. It also has associated back-office functions, customer support, card issuance and other ancillary functions.
The pandemic highlighted the value of Payoneer’s services. Companies increasingly had to turn to remote and hybrid work models, making it all the more essential to have reliable payment systems in place. Freelancers are also looking for more work in response to rising inflation.
Considering these factors, Payoneer grew revenues from $318 million in 2019 to $831 million in 2023. The company has achieved significant profitability already and trades at just 16 times estimated 2025 earnings. Meanwhile, analysts see the company posting double-digit revenue growth as well.
These are the sorts of metrics that favor well for a possible multi-bagger stock going forward. While FinTech firms are out of favor right now, PAYO stock could be set for huge returns when sentiment improves.
Grupo Aeroportuario del Pacifico (PAC)
Grupo Aeroportuario del Pacifico (NYSE:PAC) is a Mexican airport operator. Its name translates to Pacific Airport Group, which makes sense as it controls various airports on the Pacific Ocean including Puerto Vallarta, Los Cabos, and Tijuana. It also operates its flagship Guadalajara airport in addition to several properties in Jamaica.
Pacifico has been an absolute growth machine. Revenues are up from $382 million in 2014 to $1.9 billion in 2023. PAC stock has already been a multi-bagger, with shares up more than 400% since its IPO.
And there should be plenty more growth ahead. The company is involved in major expansion projects at both its Tijuana and Guadalajara airports. It also is pursuing other airport acquisitions overseas; for example, it is on the shortlist of possible purchasers for the Turks & Caicos airport concession.
PAC stock has sold off sharply due to short-term headwinds. Namely, a series of engine recalls has lowered capacity in the North American aviation market this year, and Boeing’s (NYSE:BA) 737 MAX issues are further hampering supply. These concerns have pushed PAC stock down to 15 times forward earnings and shares yield 6%.
On the date of publication, Ian Bezek held a long position in PAC stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.