With the stock market constantly fluctuating, it can be challenging for investors to identify undervalued stocks that have slipped under Wall Street’s radar. However, for those with patience and discipline, holding onto undervalued stocks over the long term can result in outsized returns.
Still, it’s important to note that no one can truly predict whether or not a stock will increase tenfold in a given timeframe. The market is incredibly complex and subject to unforeseeable events. That said, by carefully analyzing fundamentals and valuations, investors can identify shares that appear significantly underpriced relative to their potential.
The stocks discussed below check these boxes and, in my view, have the ingredients necessary to potentially return 1,000% or more to investors with long time horizons:
Katapult Holdings (KPLT)
If you’re looking for undervalued stocks with huge upside potential over the next decade, Katapult Holdings (NASDAQ:KPLT) deserves a spot on your watchlist. This innovative fintech company makes owning big-ticket items possible for millions of Americans typically excluded from traditional financing options.
I know what you might be thinking — fintech is one of the market’s most beaten-down sectors lately. And you’d be right. Many high-flying fintech stocks have crashed hard from their pandemic highs. However, I believe the negativity has opened up an opportunity in Katapult Holdings. Katapult operates in a unique niche — providing lease-to-own payment options at the point of sale for e-commerce purchases. The company partners with retailers to give customers without strong credit an alternative path to buying essential items like computers, appliances, furniture, tires and more.
Katapult’s target customer base is massive — over 30% of U.S. consumers are considered non-prime for traditional financing options. Banks and credit cards often reject them, even though many maintain steady incomes. This forces people to turn to less appealing options like rent-to-own stores or predatory lenders with sky-high interest rates. This is where Katapult steps in. The company offers transparent lease-to-own terms right at checkout on partner e-commerce sites. Customers know exactly what they’ll pay each month and can easily budget for new items that would otherwise remain out of reach.
While profits aren’t on the horizon just yet, I’m encouraged by Katapult’s progress in expanding its platform. The company recently launched a unified mobile app that lets customers shop lease-to-own offers from multiple merchants in one place. This drives loyalty and keeps customers coming back.
Despite this progress, Wall Street sentiment has turned very negative on Katapult. The stock trades at just 0.19 times sales — a fraction of fintech peers. But with shares languishing around $10, I believe much of the risk is priced in at current levels.
My view is that patience will pay off big time here. If Katapult keeps expanding its merchant network and engagement with overlooked non-prime consumers, profitability could very well arrive before 2033.
And if the company does hit that profit milestone, we could easily see 10X returns or more from today’s prices. So start building a position in this fallen fintech play before sentiment improves. According to Wall Street analysts, the consensus one-year upside sits at 90%.
Kimball Electronics (KE)
For investors seeking steadier returns over the next decade, I suggest taking a look at global manufacturing services company Kimball Electronics (NASDAQ:KE).
Kimball likely isn’t a household name, but this company has been churning out impressive growth numbers under the radar. At first glance, Kimball might seem like a boring industrial stock. However, its positioning in secular growth markets makes Kimball a compelling pick for long-term investors.
Let’s start with the financials and valuation. Kimball just wrapped up a record fiscal 2023, with sales up 35% to $1.8 billion and net income jumping 79%. The stock trades at 11 times forward earnings and 0.35 times sales — very reasonable for a company poised to keep growing at double-digit rates.
The growth story here starts with Kimball’s exposure to megatrends like vehicle electrification, advancing healthcare technologies, and automation. The company generates over 40% of sales from the red-hot auto market, where demand for electronic systems keeps accelerating.
In healthcare, medical OEMs increasingly want to outsource manufacturing to focus resources on new innovations. Kimball is aggressively seizing this opportunity, including producing a new pediatric medical device in just 9 months from concept to shipment.
Plus, Kimball expanded production capacity by 38% last fiscal year through new facilities in Thailand, Mexico and Poland. Between its positioning in secular growth markets, geographic manufacturing footprint and longstanding customer relationships, Kimball Electronics checks all the boxes for steady growth and outperformance over the next decade.
The stock has already rewarded patient investors with 49% returns in the past year. But with shares still inexpensive at 11 times forward earnings, Kimball offers the potential to deliver 10X returns by 2033. Add this under-the-radar pick to your undervalued stocks watchlist.
Okay, it’s time to address the elephant in the room. Or should I say the dog in the room? Pet product company Bark (NYSE:BARK) has been one of the market’s biggest losers since going public. But this beaten-down stock could still fetch huge returns for risk-tolerant investors over the next decade.
By now, you’re probably aware of Bark’s story. This subscription service ships monthly boxes of dog toys and treats to delight pet parents. Bark rode the pandemic puppy boom to explosive early growth.
But as Covid lockdowns ended, churn spiked as pet owners cut back on discretionary spending. Plus, rising digital-ad costs made acquiring new subscribers increasingly expensive.
The result? Bark’s stock price plunged over 94% from its highs. Yet even after this massive decline, I believe Bark’s long-term growth story remains intact. Here’s why.
First, the company is expanding beyond toys into the massive $40 billion pet consumables market. This includes treats, dental chews, food toppers, and more. Bark built relationships with big retailers like Target (NYSE:TGT) and PetSmart that paved the way for nationwide distribution of its consumables line next fiscal year.
Second, Bark unified its e-commerce platforms to boost cross-selling and order values. So far, customer conversion and repeat purchase rates on the new site are exceeding legacy platforms. Targeted digital marketing will help Bark lower subscriber acquisition costs.
And third, Bark made big strides in improving its gross margins and reducing cash burn. The company expects to approach breakeven EBITDA this fiscal year, relieving concerns about its financial health.
Make no mistake — Bark still faces risks if discretionary spending softens further amid rising recession fears. But with its growth and cash flow initiatives gaining traction, Bark appears to have turned an important corner.
So, if you have tolerance for risk and a long-term mindset, don’t count Bark out. At roughly $1 per share, Bark offers explosive upside over the next decade if it achieves sustainably profitable growth. The undervalued stock could potentially rise 10X from today’s beaten-down levels.
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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.