While higher risk, identifying promising emerging disruptors early on can be very lucrative. For investors who identify such companies when their valuations seem reasonable, game-changing returns can be possible, once the market eventually recognizes their potential.
I find it rewarding to spot overlooked stocks on the cusp of major growth inflection points. In my assessment, many rapidly-expanding yet still relatively unknown innovators look positioned for breakouts ahead. They seem to be just gaining momentum now, allowing investors to still get in early before awareness builds.
If Wall Street acknowledges the value and growth potential of these companies in the years ahead as expected, these stocks could potentially deliver substantial upside from current levels. Here are three to look into right now.
BrainsWay (NASDAQ:BWAY) intrigues me as an overlooked medical device disruptor treating mental health disorders with breakthrough Deep TMS technology. Despite a first-mover advantage and strong efficacy data, most investors still don’t know of the company.
In Q2 2023, BrainsWay delivered 18% sequential revenue growth to $7.8 million. Though down 2% year-over-year, this quarter marked an inflection back to growth, after the pandemic. With demand ramping for their OCD coil and international sales accelerating, the growth story with Brainsway seems to be just beginning.
The company’s Q2 gross margin held strong at 73% as BrainsWay improved its cost structure. Its net loss narrowed significantly to $1.7 million, or 6 cents per share. Impressively, BrainsWay achieved positive adjusted EBITDA, demonstrating progress towards their goal of providing sustainable GAAP profitability by 2023.
With a newly expanded TMS clinic network rolling out 30 Deep TMS systems, and India emerging as a major growth market, I see an intriguing entry point for BrainsWay’s stock at around $3 per share, well below analysts’ average 12-month price target of $8.75 (174% upside). I believe BWAY stock could double over the next year as commercial execution leads to breakout growth.
Luminar Technologies (LAZR)
Luminar Technologies (NASDAQ:LAZR) has swiftly emerged as a leader in next-gen LiDAR technology for autonomous driving. With over 50 announced collaborations, Luminar seems poised for explosive growth as the company transitions partner programs into production. However, the stock has languished recently near the $6 level, well below 2021 highs near $40 per share.
In their latest quarterly update, Luminar reiterated it’s on track to meet 2023 milestones, including entering series production with key customers. The company’s Q2 revenues grew a solid 63% year-over-year to $16.2 million. Importantly, the company’s cash burn rate also improved significantly, buying Luminar more runway to achieve profitability.
Despite widening losses in 2023 due to large growth investments, analysts expect Luminar will turn gross margin positive next year as commercialization accelerates. The average 2023 revenue estimate is nearly $84 million, implying 107% year-over-year growth, and $261 million (implying 261% year-over-year growth) next year. I see huge upside potential for Luminar stock right now if the company is able to exceed these estimates, which I certainly believe is possible. This Lidar leader appears to be early in tapping into the multi-trillion dollar autonomous driving opportunity.
Crocs (NASDAQ:CROX) has completely transformed from a novelty brand into a global footwear powerhouse, yet the stock still appears misunderstood. Many overlook the company’s quality turnaround execution and sustainable growth drivers now in place.
In Q2, Crocs delivered a record $1 billion in quarterly revenues, up 11.2% year-over-year. Industry-leading gross margin expanded again to 58.1%, fueling 30% operating margins even with increased growth investments.
The company’s acquisition of HEYDUDE provides a second high-growth brand addressing the comfort footwear trend. HEYDUDE sales grew 3% in Q2 to $239 million as Crocs raised full-year guidance on better-than-expected core brand momentum. I see double-digit average annual growth ahead for both its top- and bottom-lines, making the stock appear very undervalued at current levels. It already trades at a forward price-to-earnings ratio of just 7.8-times. With a diversified product and geography mix plus best-in-class margins, I believe Crocs still looks early in the growth cycle. The stock has room to run well above $200 over the next three years, in my view.
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 InvestorPlace.com Publishing Guidelines.