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3 Under-the-Radar Stocks to Buy for 2022

Key Points

  • Revolve Group is harnessing its large growth opportunities and remains an under-the-radar stock.
  • Chewy gives customers a compelling reason to stick around.
  • Hasbro pays a 2.7% dividend yield with significant growth opportunities on the horizon.

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Under-the-radar stocks could offer some of the highest potential for gains.

A new year brings new opportunities. If you're looking for stocks to add to your portfolio, some of the best options may be lurking in the shadows and giving you lots of potential for gains. Some of the best stocks are names you know, but others are under the radar, giving you the chance to get in before the rest of Wall Street.

Three Motley Fool contributors offer their take on under-the-radar stocks that can explode in 2022. They picked Revolve Group (RVLV -1.71%)Chewy (CHWY 4.95%), and Hasbro (HAS 3.01%).

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Image source: Getty Images.

A digital fashion revolution

Jennifer Saibil (Revolve Group): Online shopping has become a lot more than Amazon. Many of the biggest opportunities in the future belong to newer, smaller companies that speak to niche groups and are capturing market share.

Revolve Group is a small but growing online-fashion company that uses artificial intelligence and machine learning to offer elite fashion to its target market of millennial and Gen Z shoppers. It offers more than 1,000 curated brands and connects customers and influencers with high style, and it's all built on a dynamic, tech-driven platform.

This is resonating with its audience, and sales increased 62% year over year in the third quarter to $244 million. It's also profitable, posting $17 million in net income. 

As a small company with growing sales, Revolve is harnessing its large opportunities. The U.S. is its biggest market, accounting for 81% of total sales in the third quarter, and while international sales decreased a percentage point as a portion of sales, the huge international markets can play a pivotal role in expansion.

Active customers increased 11% year over year in Q3, and average order value increased from $232 to $274. Average sales per customer growth accelerated in the past two quarters, pointing to the brand becoming even more popular with its core group of customers. More new buyers are buying full-price items, indicating a long trajectory of further growth.

Revolve Group stock gained 86% over the past year, nearly three times the S&P 500's gain of 29% over the same period. Shares trade at 47 times trailing-12-month earnings, which isn't cheap, but not unreasonable for a high-growth stock. Revolve Group has tremendous potential, and this under-the-radar stock could explode in 2022.

Chewy is quickly growing customers and revenue

Parkev Tatevosian (Chewy): Chewy is an online pet retailer that thrived at the pandemic onset. Millions of folks went looking online for a shopping alternative to visiting stores in person. Chewy proved to be an excellent option for pet parents, and the company gained millions of new customers. As of Oct. 31, Chewy had 20.4 million active customers, up by 14.7% from the same time last year.

Additionally, those customers continue to increase their spending at In the company's most-recent quarter ended Oct. 31, net sales per active customer grew by $56 from the same quarter last year. Management has done an excellent job broadening item selection, and consumers are responding by allocating more of their pet spending to Chewy.

Moreover, it's giving consumers more reason to stick around. One benefit of shopping at Chewy is free access to Connect With a Vet for subscribers to its Autoship program. Connect With a Vet allows customers to talk to a Chewy-provided veterinarian over the phone or online. That can add a layer of convenience for pet parents who now have an option that bridges the gap between ignoring your pet's ailments and lugging them to potentially expensive local veterinarians. 

The one-two punch of adding new customers and rising spending from each customer boosts overall revenue. Chewy's revenue doubled from $3.5 billion in 2019 to $7.15 billion in 2021. Fortunately for the company, pet ownership is typically a long-term commitment. That allows it to serve its customers for several years.

Chewy's stock is trading at a price-to-sales ratio of 2.9, less than half the price it was selling for earlier in the year. An inexpensive price coupled with growing revenue and customers make Chewy an excellent stock to buy for 2022. 

An emerging entertainment powerhouse

John Ballard (Hasbro): There are several reasons to like Hasbro right now. Former CEO Brian Goldner, who passed away a few months ago, left the company with a clear growth roadmap, and the company's recovery from the pandemic gives a hint of what's to come.

Hasbro has dozens of film and TV projects in the works to capitalize on its 2019 acquisition of Entertainment One, which has taken over a leading role in developing Hasbro's top toy franchises, including G.I. JoeMagic: The Gathering, and My Little Pony, into major theatrical releases. The entertainment segment posted a revenue increase of 76% year over year in the third quarter, as it recovers from the pandemic. But future releases could drive significantly more revenue growth.

Digital games also continue to post consistent growth, up 32% in the third quarter. The demand for Magic: The Gathering and Dungeons and Dragons, along with higher entertainment deliveries, helped Hasbro offset a small decline in consumer products last quarter. Hasbro is wrestling with supply-chain disruptions, but total revenue still increased 11% year over year, with operating profit up 9%. This sets the stage for strong growth once the supply problems are over.

In the meantime, investors can look forward to collecting an above-average dividend yield of 2.7%. With clear growth catalysts on the horizon, the stock could outperform the broader market in 2022 and beyond.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jennifer Saibil has no position in any of the stocks mentioned. John Ballard owns Amazon. Parkev Tatevosian owns Amazon and Chewy, Inc. The Motley Fool owns and recommends Amazon, Chewy, Inc., and Revolve Group Inc. The Motley Fool recommends Hasbro and recommends the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.

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