Exploring the market for companies that could yield massive returns in a few years can be daunting. With high flyers soaring left and right, sticking to your gut and playing the long game takes discipline. However, with diligence and clarity, identifying stocks with the potential to 10x your investment is easier.
So, what do you look for in potential 10x stocks? Experts usually watch out for fair valuations, improving financials and favorable long-term prospects. Today, I screened the market for companies displaying these qualities and will happily share my results. For this analysis, I used the following criteria:
- Return on assets (ROA): More than 10%. Return on assets measures how much profit a company can generate with the assets on its balance sheet. And 5% is considered a good value, so I looked for better.
- Price-to-sales ratio (P/S): 1.25 and below. The P/S measures the company’s revenue against its current trading price to give investors a general idea of its fair value. A P/S ratio between 1 and 2 is considered good.
- Price-to-earning growth (PEG) ratio: 1.25 and below. PEG is another metric that identifies a stock’s value; this time, it uses its current price and earnings growth rate across the last twelve months.
- Forward price-to-earnings (P/E) ratio: 20 and below.
- Analyst rating: Buy or higher.
I took the top three results based on the highest return on assets, and I now I’ll present them from highest to lowest.
Visteon Corporation (VC)
Known for being at the forefront of the mobility revolution, Visteon Corporation (NASDAQ:VC) is a global automotive technology company. It leverages software and hardware solutions for vehicle cockpit electronics and connected car services. The company works with some of the largest car manufacturers, including Ford, Jaguar Land Rover, Renault, Toyota and Volkswagen.
The firm ended Q2 of fiscal year 2024 with solid performance despite industry challenges. Revenue grew only 3% year-over-year (YOY). But due to strong operational efficiency and cost management, earnings grew by an impressive 262%. In addition, the company launched 41 new products across 17 OEMs and secured $3.1 billion in new business.
If you dig deeper into its financial ratios, you’ll see that it has a remarkable 20.85% ROA, a price-to-sales ratio of 0.73, a forward PE ratio of 12.92 and a PEG ratio of 0.5. Analysts also rate VC stock as a buy, which, for me, is more than enough reason to consider it one of the potential stocks that can 10x your capital in a few years.
AllianceBernstein Holding LP (AB)
Known for its exemplary institutional research, AllianceBernstein Holding LP (NYSE:AB) is a financial powerhouse. While not as large as Morgan Stanley (NYSE:MS) or BlackRock (NYSE:BLK), its expertise and reputation are undeniable.
The company offers retail and institutional services, private wealth management and research services. It recently announced the appointment of its first-ever Chief Artificial Intelligence Officer, Andrew Chin, as it embraces AI to enhance its operations, research capabilities and efficiencies across various corporate functions.
According to AllianceBernstein Holding’s financials, the company had $1.3 billion in net inflows and a 13% increase in investment advisory fees. Key highlights include a modest 1.9% increase revenue YOY and a 5.6% bump in net income.
Suppose you couple this with other metrics like its 15.80% return on assets, highlighting its strong asset utilization, a forward P/E ratio of 14.42 and an impressive PEG ratio 0.68. In that case, we may have a strong recipe for growth potential that could see the stock 10x.
Therefore, Wall Street consensus rates it as a strong buy because of its growth possibility.
Copa Holdings, S.A. (CPA)
If you’ve tried traveling to South America, you have probably heard of Copa Holdings, S.A. (NYSE:CPA). The company operates a cargo and airline passenger service through its subsidiaries. CPA has flight operations in 32 countries in North and South America and the Caribbean. The company’s first-quarter results beat analyst expectations, and it will release its second-quarter financials today. This could potentially push the company higher, as June traffic numbers have been positive.
While the company was negatively impacted by the grounding of 21 Boeing 737 MAX 9 aircraft, which cost $44 million, Copa Holdings was able to make $4.19 in basic EPS for Q1 2024, up 36.3% YOY. In addition, the company’s passenger traffic grew by 7.1% while lowering its operating costs by 6.9% per available seat mile.
The result is an impressive 13.58% ROA, a price-to-sales ratio of 0.98, and a strong buy consensus from Wall Street analysts. Copa Holdings packs a strong punch with its combination of profitability, attractive valuation and promising growth. If you’re looking for potential stocks that could 10x in the future, CPA stock should have a place on that list.
On the date of publication, Rick Orford 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 InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.