2020 has brought a seemingly unending string of twists and turns, and the associated uncertainty has resulted in an unparalleled period of volatility for the stock market. There's a good chance that more volatility is on the way as we move into the year's final quarter, but there are still investment opportunities on the table that could help make you rich.
Read on for a look at three stocks that trade at non-prohibitive valuations and offer tremendous potential upside.
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Glu Mobile
Glu Mobile (GLUU) is a company that develops and publishes games for phones and tablets, and its stock could wind up being a big winner. The company's share price has climbed roughly 26% across 2020's trading, but shares trade down roughly 30% from their 52-week high.
Shares got hit with a steep sell-off after the company published second-quarter results in August that brought an earnings miss and guidance for decelerating bookings growth. The report also arrived with disappointing news about the publisher's upcoming release pipeline, with one title being delayed into next year and news that resources were being shifted away from another in-development project, following underwhelming audience test numbers.
For the most part, the factors that spurred the recent sell-off look like temporary setbacks. The company's guidance for year-over-year bookings growth of 10% in the current quarter represents a big step down from the 79% increase that the business posted in Q2, but it still indicates the company's core franchises are keeping players engaged, and subsequent releases should spur a return to bigger growth.
Glu has a market capitalization of $1.3 billion and trades at roughly 21 times this year's expected earnings. The company has a strong balance sheet to fund operations and pave the way for acquisitions in the near future, and just one new hit franchise could send sales and earnings soaring. With the gaming industry poised for long-term growth and some of the business' strengths being underestimated, Glu stock is a hot buy.
Hanesbrands
Hanesbrands (HBI -0.95%) stock has posted solid performance this year thanks to continued momentum for its Champion brand clothing and a quick manufacturing pivot to produce face masks in response to the coronavirus. While the company might not immediately spring to mind when conversation turns to the topic of stocks that could make you rich, the business looks pretty solid and has underappreciated growth drivers that could deliver big returns for shareholders.
Hanesbrands managed to keep revenue flat in its June quarter despite widespread closures for brick-and-mortar retail operations and reduced consumer confidence, and earnings per share actually climbed 12% year over year in the period. The pivot to mask-and-protective wear production in the period allowed the business to generate $752 million in sales for the category, and a 68% increase in online apparel sales helped offset some of the pressure from retail closures.
Hanesbrands stock has climbed roughly 4% across 2020's trading despite unprecedented pressures, but it trades down roughly 37% over the last three years and looks cheap at present. The depressed valuation combined with a potential long-term growth driver in the form of Champion give the stock big growth potential. Champion has become a hot name in athleisure fashion, and it looks to have staying power thanks to continued popularity among millennial and Generation Z age demographics.
Hanesbrands stock trades at roughly 11 times this year's expected earnings and has a 3.9% dividend yield.
Eros STX Global
India-based entertainment company Eros International merged with U.S.-based STX Entertainment to form Eros STX Group (ESGC) at the end of July. The company seems pretty clear about moving forward with streaming as its most important growth driver, and the merger has resulted in an improved content library. It should also put the business in better position to produce film and television programming that appeals to a global audience.
The stock has slid roughly 36% in 2020, due in part to pressures from the coronavirus pandemic and financial performance that has fallen short of expectations. Concerns about new share offerings and debt taken on to finance content production and technology development have also pressured the company's share price.
Eros STX now has a market capitalization of roughly $380 million and is valued at about 0.6 times Eros and STX's combined revenue of roughly $600 million last year. It's also valued at less than 0.4 times the $1 billion in sales that management expects to generate in 2022.
The company has a massive catalog of Hindi and regional-language films (over 12,000 at the end of last quarter) that could help build its subscription video service in India and other territories. It's also been expanding its distribution network and has recently formed partnerships with companies including Amazon, Sony, and Dish Network. Eros STX will still have to prove that it can deliver hit new content that drives subscriber and distribution growth, but the company's low price-to-sales multiples and huge long-term growth potential in streaming suggest the stock could post explosive gains if the business makes progress on those fronts.
