A ’multibagger’ stock, a term coined by the legendary investor Peter Lynch in his famous 1988 book ‘One Up on Wall Street’ indicates a stock that can return more than 100% of the initial investment.
Needless to say, such stocks are rare, but not impossible to find, especially in an environment with a hawkish Federal Reserve (Fed), whose rate hikes are causing stocks and other “risky” assets to fall, offering investors opportunities to pick up potential multibaggers.
Accordingly, Finbold analyzed the universe of stocks and located two potential multibaggers to keep on a watchlist, one from the world of small-cap growth stocks and the second from the more established large-cap universe.
Picks for you
AMMO Inc. (NASDAQ: POWW)
The ammunition market is on the rise, mostly due to Russia’s unprovoked invasion of Ukraine. Meanwhile, there is a supply shortage due to supply chain issues and high raw material prices.
From 2016 onwards, AMMO has made it their business to thrive in such environments, growing their sales by 120 times over the past five years, and in the last quarter, the firm’s revenue grew by 37%. Though it’s not all rosy, the gross margin rates slipped due to higher material costs owing to supply chain issues and rising inflation.
Furthermore, AMMO reiterated its 2023 Guidance with total revenues of $300 million to $310 million, earnings before interest, taxes, depreciation, and amortization (EBITDA) of $82 million to $85 million, and adjusted EBITDA of $108 million to $111 million.
Despite the earnings guidance, POWW is currently trading near the lower end of its 52-week range, staying between $3.61 and $6.05 over the past month, well below all moving averages.
Meanwhile, technical analysis indicates a resistance line at $5.82 and a support line at $3.52.
TipRanks analysts rate the shares a ‘strong buy,’ seeing the average price in the next 12 months reaching $8.33, 129.48% higher than the current trading price of $3.63.
Marathon Oil Corporation (NYSE: MRO)
A Houston-based hydrocarbon exploration company, Marathon stock, became popular in 2022 due to the global energy crisis also caused by the Russian invasion. As Marathon is a more established company, they also pay out a dividend to their investors with a yield of 1.4% with an annual dividend of 0.$32.
In its latest earnings release, the firm beat revenue expectations by posting $2.3 billion in revenue, a 101.8% year-on-year (YoY) increase, beating estimates by $190 million. Similarly, the earnings per share (EPS) were $1.32, beating estimates by $0.04.
As the stock is up over 50% year-to-date (YTD), both the short-term and long-term trends are positive, which is a positive technical indicator. Over the past month, the shares traded from $21.40 to $27.29, showing a support zone from $24.47 to $24.92 and a resistance zone from $25.78 to $26.79.
On Wall Street, TipRanks analysts rate the shares a moderate buy, seeing the average price in the next 12 months reaching $31.75, 23.49% higher than the current trading price of $25.71.
Potential growth
Multibagger stocks are often a product of a favorable environment for a given industry, coupled with high revenue growth and a potential for more of the same down the line. Both of the above two companies have this going for them, and with some shrewd business acumen and returns, these two stocks could double in price over the next 12 months.
In the investing world, nothing is a given; therefore, risk appetites need to be gauged before deciding to chase a potential multibagger stock.
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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
