More people are working remotely now than ever before because of the COVID-19 pandemic. This led investors to pile into work-from-home stocks like Slack Technologies, Zoom Video Communications, and Okta. But there's another largely overlooked player: enterprise content management (ECM) company Box (NYSE:BOX).

Box could bring life-changing stock returns as it capitalizes on the remote workforce trend. But there's a catch.

Separated computers linked to an image of a cloud.

Image source: Getty Images.

The remote-workforce trend

The coronavirus has changed work environments for millions of people -- among those still employed, many are working remotely. As this present situation passes, one would assume they'd all just return to their places of employment, but not everyone will.

Consider TripAdvisor. In a recent blog post to employees, the CEO outlined job cuts and the permanent closure of certain offices. But a little nugget may have gone unnoticed. He praised employees for their productivity while working from home and said many employees from the closed offices would continue working remotely even after the coronavirus restrictions end.

This raises the question: How many more companies are like TripAdvisor?

Note that TripAdvisor was struggling prior to COVID-19 and needed to make changes to increase profitability. That plays into its decision. So this shouldn't be extrapolated too far to assume all businesses will start shuttering offices and ordering the majority of their employees to work from home. A safer assumption is that there will be more remote work in the future than in the past.

Not everyone has to work from home for this trend to be significant. Any degree of fragmentation to a workforce is a compelling reason to have a cloud-content management solution. Enterprise data needs to be accessed from anywhere, shared with everyone, and handled securely. That's what Box makes possible.

A cloud key on a keyboard

Image source: Getty Images.

Why Box can bring life-changing returns

In 2019, Box launched a security tool called Box Shield. Imagine a scattered workforce accessing sensitive information on multiple devices, and it's easy to see why security is an important part of a complete ECM package. Box will continue adding features, but Shield completed its product lineup. And with integrations to popular workforce productivity tools like Slack, Zoom, and Microsoft Teams, Box is an obvious choice for any business looking to manage its data.

There are some who believe enterprise content's migration to the cloud is still in its infancy. According to research from Fortune Business Insights, the total market could exceed $43 billion by 2026, up from just $15 billion today. That's a huge, growing pie that Box is still going after. For perspective, the company only generated $696 million in trailing-12-month revenue.

IDC, Gartner, and Forrester are three different research firms, but all agree that Box is a leader in the cloud-content management space. It's a strong suggestion that if any company is poised to capitalize on this $43 billion opportunity, it's Box.

The stock currently trades at just 3.3 times trailing sales, which is reasonable for a technology company. Between its huge addressable market and the possibility of being rewarded with a higher valuation, Box could be a big winner.

But here's the catch

The reason Box doesn't have a higher valuation is because it doesn't deserve one, at least not yet. Consider that revenue growth is slowing: Revenue grew 16% year over year in the fiscal 2020 second quarter, 14% in the third quarter, and just 12% in the fourth quarter. Also, the company's net retention rate (an important metric that measures customer spending over time) has fallen for four consecutive quarters to 104%. You'd expect it to grow with the release of Box Shield, and the downward trend suggests that customers aren't impressed enough to increase spending.

Moreover, Box isn't profitable on a GAAP basis nor is it free-cash-flow positive. That's why activist investor Starboard Value took a 7.5% stake in the company. Starboard believes the stock is undervalued, and the company needs to focus on profits -- Box CEO Aaron Levie heeded that advice.

The company just delivered its first full year of adjusted profitability in fiscal 2020 with earnings of $0.03 per share. Now management is focused on improving free cash flow. It has laid off some non-strategic employees and reorganized its research & development efforts, among other moves. But there is still a long way to go toward its fiscal 2023 goal of 35% combined revenue growth and free-cash-flow margin.

The magic dollar amount for a life-changing investment is relative to every investor. But here's what's not relative: For Box's return to change your life, the stock would need to occupy a prominent place in your portfolio -- a place that should be reserved for your highest-conviction stock selections. 

For Box to reward shareholders with life-changing returns, it must sustain its operational turnaround, improving in those aforementioned areas. With so much room for improvement -- and uncertainty -- I'm not sure I'd give it that high-conviction portfolio allocation yet.