3 Stocks That Could Pop 25%

In today’s increasingly fragile market environment, underrated stocks that achieve outsized returns in the coming years are the proverbial pot of gold at the end of the rainbow.

 

Even as high-growth tech stocks that have made investors enormous sums of money in recent years struggle, there are still hidden gems to be found. This is especially true among small-cap companies that operate in emerging markets. Here are three stocks that could pop 25 percent.

 

Millicom International Cellular (NASDAQ:TIGO) is a telecommunications company focusing on the Latin American market. Until a recent sale of its assets on the continent, Millicom was also servicing the African market.

 

Millicom is in a position to deliver rapid growth as it expands its user base in developing economies. The company’s Q4 report detailed user base growth of 22 percent, as well as strong growth in Colombia, Panama and El Salvador.

 

Home business customers accounted for a good portion of this growth, with a 10 percent increase year-over-year.

Millicom has faced some headwinds, although they are mostly transient. In the Guatemalan market, for example, previously strong sales of handsets slumped in Q4 due to ongoing chip shortages. The company also had to restructure a portion of its debt, though this effort has largely been wrapped up.

 

Analyst price targets for the next 12 months give a glimpse of Millicom’s potential. The median price target stands at $46.30, up 77 percent from current levels. Even if the lowest target, $32.90, were met, the stock has potential to run up by more than 25 percent. 

 

Overall, Millicom could be a winner over the coming several years. The easing of chip shortages and continued investment in Latin America will likely support higher prices for the stock. Millicom is in a unique position to offer telecommunications services in rapidly growing economies with previously untapped customer bases. With this year’s projected returns as a foundation, it’s conceivable that Millicom prices could go up a lot more than 25% over the next few years.

 

Mexican multinational Grupo Bimbo SAB de CV (OTC:GRBMF) is best known for its bakery business. Operating through a network of subsidiaries, the company manufactures and distributes a variety of breads, sweets and other baked goods.

 

In 2021, Grupo Bimbo saw standout growth. Q4 operating income rose 17.4 percent year-over-year, while margin rose by 30 basis points.

 

Sales throughout the North American market advanced, particularly in Mexico where the company experienced growth of 21.5 percent.

 

The most promising growth came from the company’s expanding Latin American presence. Here, sales grew by 24.6 percent. It should be noted, however, that not all of the gains from Latin America were organic, as a recent acquisition had bolstered sales growth in the region.

 

Aside from pure growth, the company also boasts several other appealing metrics. In 2021, return on equity rose to a 10-year high of 15.2 percent. Valuation metrics also give Grupo Bimbo strong investment potential.

 

Despite achieving high levels of growth last year, the stock is priced at the fairly modest forward P/E ratio of 12.8. A trailing price-to-sales ratio of just 0.71 likewise suggests that Grupo Bimbo could be a strong value, given its upward potential.

 

Grupo Bimbo is obviously a long-term bet, though short-term has upside potential of 25% according to a discounted cash flow forecast analysis, pegging fair market price per share at $4.03.

 

The company’s growth throughout both the North American and Latin American markets gives it significant potential in the coming years. At the moment, Grupo Bimbo is a fairly priced, high-growth company with a solid business model and a clear path to a strong presence in emerging markets. While it may take time, Grupo Bimbo could post considerable gains over the coming seven years, potentially reaching its fair market value and then some.

 

Nomad Foods (NYSE:NOMD) is a prepared foods company that distributes frozen and ready-to-cook foods widely in European markets. Nomad offers everything from frozen fish to pasta, giving it a wide base of potential customers. The company also has a strong presence throughout Northern and Western Europe.

 

Recently, Nomad Foods has posted somewhat anemic growth. Its overall revenue growth for the most recent reported quarter was just 7 percent year-over-year. Earning growth was actually negative, dropping by slightly over 50 percent year-over-year.

Where Nomad Foods shines, however, is in its valuation.

 

The company’s P/E ratio is 12.3, while its price-to-book is 1.48. Price to cash flow is also quite low at 9.76. Collectively, these metrics have earned Nomad Foods a Zacks value rating of A. 

 

Analyst price targets strongly support the idea that Nomad Foods will see robust share price growth this year. The average price forecast is $29.80, up 27.6 percent against the current price of $23.36.

 

Interestingly, the targets for Nomad foods fall in a very narrow range. The lowest is $29, while the highest is $31. In any scenario between these targets, Nomad Foods would have an approximate upside between 24 and 32 percent in the coming 12 months.

 

Overall, Nomad Foods is likely a company in a temporary slump due to slow growth. The growth issues, however, are forecast to pass as the company continues to expand and take advantage of market opportunities in Europe.

 

Taking its excellent value and high projected 12-months returns into account, Nomad Foods looks like a strong buy at the moment. Over the next few years, the company has at least a chance to rise 25% or more.

 

As you can see, these companies operate in different markets and industries, and each one has a different set of strengths. For near-term gains, Millicom is likely the best bet.

 

In terms of stable, long-term growth, Grupo Bimbo is a strong contender. Nomad Foods sits nicely in the middle, providing a good mix of growth potential and good projected returns in the coming 12 months. Nomad is also the best stock from a valuation perspective.

 

At the end of the day, a mix of these companies is likely be the best option. While all of them have their strengths, they also each carry certain risks. Investing in a blend of the three maximizes the chances for rapid growth while mitigating the amount of risk you’ll take on in any one company.

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