Two stocks that have completely missed out on the stock market's relentless gains over the past few years are Fitbit (FIT) and GoPro (GPRO 2.38%). Both have been disasters for investors, and there's no telling how much worse they could get.

But with beaten-down valuations and rock-bottom expectations, both stocks could make for lucrative turnaround plays. Let me be clear -- these stocks are risky and not for the faint of heart. There's not much indication that either company is making progress turning things around.

But because expectations are so low, any sign of improvement at Fitbit or GoPro could send the stocks soaring.

A dial labeled risk set to maximum.

Image source: Getty Images.

Fitbit

Fitbit's brand is synonymous with fitness trackers, but that hasn't stopped the stock from being decimated over the past few years. Since peaking in 2015, soon after the company's IPO, shares of Fitbit have lost 90% of their value.

FIT Chart

FIT data by YCharts.

Fitbit was growing revenue quickly as recently as 2015, but the past four quarters featured double-digit sales declines. The holiday season of 2016 was a disaster, with sales dropping nearly 20% year over year, and the bottom line plunging into the red. The situation hasn't improved, with revenue slumping 22% in the last reported quarter.

Fitbit will report its 2017 fourth-quarter results in the coming weeks. Sales of the company's Ionic smartwatch will determine whether things went better this time around. There have been some reports that the Ionic isn't selling all that well. Priced at $300 and competing directly with the Apple Watch, that's not surprising.

With all of these negatives, why even consider investing in Fitbit? For one, the stock price bakes in so much pessimism that any progress at all toward stabilizing the top line or improving the bottom line could send shares soaring. Fitbit is currently valued at about $1.2 billion. Back out the net cash on the balance sheet, and that brings the enterprise value down to about $660 million. Fitbit expects to produce full-year revenue of a bit more than $1.6 billion, putting the enterprise value to sales ratio at a measly 0.41.

Fitbit will post a loss for 2017, but it only needs to produce unimpressive margins in the coming years in order to justify its valuation. The bar is low, and investors willing to bet that Fitbit can exceed rock-bottom expectations will be rewarded handsomely it they're right.

If they're wrong, the stock could still go much lower.

GoPro

Action camera maker GoPro is in a similar position as Fitbit. Once-robust sales turned into declines in 2016, and profits transformed into losses. GoPro returned to growth in 2017, but its preliminary fourth-quarter results call for another abysmal holiday season. The company expects to produce just $340 million of revenue, down from $541 million in the prior-year period.

The stock has lost 94% of its value since peaking in 2014, an even worse performance than Fitbit.

GPRO Chart

GPRO data by YCharts.

What's going wrong for GoPro? Unfortunately, pretty much everything. Weak sales of the company's last-generation HERO5 Black camera forced GoPro to cut prices in December, a strategy that is now being carried over to the latest HERO6 Black. The premium model HERO6 Black price was cut by $100 in January, a sign that consumers are just not willing to pay steep prices for the company's products anymore. A combination of lower-priced competition and saturation of the action camera market could be contributing factors.

An even bigger disaster has been GoPro's entry into the drone business. GoPro's Karma drone was recalled soon after its launch in late 2016. The silver lining: Sales were so low that the recall likely didn't cost the company much. Now GoPro is officially exiting the drone business after selling its remaining Karma inventory.

Like Fitbit, there's very little to like about GoPro at this point. But also like Fitbit, expectations are rock-bottom. GoPro is now valued at about $750 million. Annual sales will be about $1.2 billion in 2017. Any sign this year that the worst is over could send the stock higher. And there's always the chance that the company gets acquired.

GoPro is riskier than Fitbit, if only because it's balance sheet has nowhere near as much cash. Buying either stock is risky, as both could go much lower. But when you see extreme pessimism like this, there's sometimes an investment opportunity if you can see through the doom and gloom.