Triple-digit returns rarely come easy in the stock market. Chasing sky-high gains often leads to disappointment, or even disaster, for overly-aggressive investors. However, a select handful of special companies possess the fundamentals to potentially deliver 1,000%+ upside over a multi-year timeframe.
Landing a 10-bagger requires identifying transformative businesses in their early innings and then holding them for the long haul. Of course, emerging industries come with elevated risks and uncertainty. But for those with patience and discipline, the rewards can be life-changing.
While nothing is guaranteed, the total addressable markets for many small-cap firms measure in the hundreds of billions of dollars or more. Capturing even a sliver of industries that enormous leads to exponential growth potential, if these companies execute properly. Here are three such stocks I think are worth considering for their outsized growth potential.
ClearSign Technologies (CLIR)
ClearSign Technologies (NASDAQ:CLIR) has developed a novel combustion system that slashes harmful emissions like NOx by over 85% in furnaces and boilers. The company’s patented technologies optimize flame geometry, temperature, and stability.
With negligible sales, ClearSign currently remains a “show me” story. However, global emissions regulations are getting stricter by the year, which opens up a massive opportunity. ClearSign estimates its technologies can address a $3.7 billion market. If the company captures even in a fraction of that market, investors could be entitled to some pretty substantial gains.
While unproven, ClearSign counts leading companies like ExxonMobil (NYSE:XOM), Honeywell (NYSE:HON), and Shell (NYSE:SHEL) as partners. That’s some strong external validation. The company is already seeing initial commercial orders this year, with revenue expected to ramping significantly in the future. Analysts expect revenue to come in at $2 million this year (up 420%), $7.4 million next year (up 282%) and $25 billion (up 243%) by the end of 2025. Profitability could be achieved by 2025. If we look at 2027 earnings, the forward price-earnings ratio drops below 2-times. That’s extraordinarily cheap, for any stock, let alone one with ClearSign’s growth potential.
At a tiny $35 million valuation today, ClearSign offers massive upside if it delivers on its promise. Sure, it’s highly-speculative. However, ClearSign targets a real unmet need in a massive market. I’m willing to patiently hold a small position as an upside call option on its success. A recent “buy” rating from H.C. Wainwright two weeks ago set the price target at $6, implying 560% upside in just one year.
Orion Energy Systems (OESX)
In the beaten-down small-cap space, building a position in efficient lighting solutions provider Orion Energy Systems (NASDAQ:OESX) seems very compelling. This company, with a $45 million market capitalization, has struggled in recent years. Its revenue has been in decline since Q4 2021.
However, sentiment around OESX stock is starting to turn around. Orion managed to slow down its revenue decline to just 1.64% this past quarter, on increased LED lighting retrofit activity. With its leading focus on ESG-conscious customers, analysts expect Orion to deliver over 30% sales growth this year and 39% growth in 2023.
Previous missteps also appear to have been corrected. Orion has shifted its focus to its most profitable commercial and industrial verticals, while optimizing its cost structure. These actions helped swing the company back to profitability last quarter. Looking ahead, analysts forecast profitability in 2026 and rapid earnings per share expansion from then on.
Trading at just 0.2-times sales and 3.7-times 2027 earnings estimates, OESX stock looks significantly undervalued, if its turnaround takes hold. Secular tailwinds around energy efficiency, government infrastructure spending, and ESG should provide an added long-term boost. Accordingly, the consensus price target sits at $7, implying over 400% upside over the next year.
Luminar Technologies (LAZR)
The knock on lidar technology has always been high costs. At over $10,000 per sensor, widespread adoption seemed unlikely. However, Luminar has rapidly improved its manufacturing process to slash those costs over the coming years. Management believes its lidar sensors could see sub-$100 pricing at scale.
This cost curve is a game-changer, allowing lidar to complement radar and cameras in the sensor suite for self-driving cars. Luminar counts heavyweights like Volvo (OTCMKTS:VLVLY), Mercedes (OTCMKTS:MBGYY), and Mobileye (NASDAQ:MBLY) as partners and has the dominant long-range lidar for true autonomy. Even if lidar penetration hits just 3-4% of auto production by 2030, Luminar sees a $5 billion revenue opportunity and a $60 billion order book.
With costs still falling and performance improving, I believe lidar adoption will blow past those expectations. We live in an age where consumers demand the latest technological features. Once lidar enters mid-tier vehicles later this decade, I expect penetration to rapidly rise past 20-30%. But again, I wouldn’t shy away from saying that this is still a speculative investment.
At just a $2 billion valuation, LAZR stock offers explosive upside if it emerges as the lidar standard. Analysts expect triple-digit sales growth this year, which will again double to near 200% growth next year.
Wall Street sentiment with LAZR stock is mixed, with the price target dragged down to $11.5, implying “only” 122% upside over the next year. However, Gurufocus’ model believes the fair price value of the stock could be $224 by 2026, indicating a massive 4,200%-plus upside potential. But again, Gurufocus notes that this stock could also be a value trap, so it’s one which is clearly polarizing. In any case, I think this stock’s speculative growth potential outweighs its risk.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the biedexmarkets.com.com Publishing Guidelines.