Who doesn't love a good worst-to-first story, the underdog that got it together and came out a winner? It's natural to feel that way as an investor, too -- but when you see a stock that's been beaten down, it's important to find out why, and whether that company has what it takes to be a winner for your portfolio.

Here are three examples of companies with large upside and potentially brighter days ahead:

Revolve Group

Revolve Group (RVLV -0.21%) is a next-generation fashion retailer. Unlike brick-and-mortar clothing companies with bulky fixed costs and bloated inventories, Revolve's operations are efficient. With no permanent physical store footprint, the online retailer leans on the quickly growing e-commerce space for growth.

A stack of dollars.

Image source: Getty Images.

Online clothing sales are expected to grow by 9% globally, making this an ideal avenue to pursue for the international company. Revolve does most of its business in North America, but has a growing presence in Europe, South America and Asia. To effectively connect with young folks, Revolve Group actively partners with social-media influencers to push its product, a strategy that led to 20% revenue growth before the COVID-19 pandemic.

To manage inventory, Revolve Group's reordering program offers its designers real-time insight on how their products are selling. Revolve Group's inventory is based on a constant assessment of consumer demand, which limits the risk of inventory gluts. If a shirt is selling especially well, Revolve knows it immediately and will act accordingly.

The pandemic did hit Revolve somewhat hard, but its sales are rapidly recovering and it maintained positive cash flow throughout the global shutdowns. This 2019 IPO is the rare blend of high growth and profitability. Its adjusted price-to-earnings ratio around 30 (excluding one-time costs associated with its market debut last summer) is tolerable considering the high potential.


iHeartMedia (IHRT -3.97%) is a legacy AM/FM company transforming itself into a digital podcasting company. It exited chapter 11 bankruptcy last spring a much leaner company. iHeart entered bankruptcy in 2018 with roughly $20 billion in debt; today it has $5.3 billion in debt, of which 90% does not expire for another six years.

Spotify Technology is certainly formidable competition, but so far, there seems to be room for both. iHeartMedia's podcasting revenue grew by 80% in the first quarter this year powered by celebrity partners such as Will Ferrell. The category now represents 12% of iHeart's total sales. iHeart's 1.3 times price-to-sales ratio (P/S) compares to Spotify's P/S around 6, showing iHeart has plenty of room to run -- if it can execute.

CEO Bob Pittman is investing heavily in iHeart's advertisement capabilities to help sustain iHeart's piece of the podcasting pie. This year, the company debuted the Storytellers tool specifically for podcasting personalities. Not only does this application equip podcasters with data on what material works better than others, it helps with advertising. Rather than taking a several-minute break from the entertainment, listeners now hear brief ads within the actual show. Long commercial breaks are annoying; iHeart is helping to fix that problem.

Despite a large pandemic-induced pullback from all advertisers that hurt iHeart's AM/FM sales, it posted free cash flow of $70 million this past quarter. Its $200 million from streamlining operations, and $100 million in untapped credit, gives Pittman the firepower to keep investing where necessary. Through 2023, the podcasting industry is set to enjoy growth of 30% and iHeart is poised to participate. iHeart's 24.9 million monthly active podcasters makes it among the most popular commercial podcast publisher in the world. Spotify's audience is currently bigger, but there is room for multiple players and iHeart being one of them. With radio ad revenue 70 times larger than podcasting revenue today, iHeartMedia is in inning one of growth.


Last on the list is Boeing (BA 1.34%). This troubled stock is more than 50% off its all-time highs and may certainly take a while to recover. But if it does manage pull through, the upside could be immense.

Boeing has done what it needed to do to overcome a daunting one-two punch of its best-selling 737 Max plane being grounded worldwide and COVID-19 halting air travel. To do so, CEO Dave Calhoun turned to the credit markets, with $25 billion in new debt. The move fortifies a once-scary balance sheet and brightens the prospects of Boeing's long-term existence.

After this month's Federal Aviation Administration test flights, the 737 Max should soon be back in the air. Furthermore, based on bullish predictions by Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, and former FDA chief Scott Gottleib, we may have an available vaccine by next year. This scenario -- combined with pristine air filters and constant cabin sanitation -- should ease most of the public's flying concerns eventually in the years ahead. Let's hope it pans out.

While Boeing headlines frequently discuss order cancellations from airlines, it still forms a duopoly (with Airbus) that should ensure long-term demand will return when air travel does. More people will most likely fly in the future; planes will need upgrading. Boeing is ideally positioned to benefit.

Stocks should never be considered a guarantee. Things can go wrong even when the smartest investors are least expecting it. Regardless, these high-quality companies are all staples of my portfolio. The risk-reward ratio is compelling for the three, and all could be primed for much higher share prices going forward.