While finding stocks near their 52-week lows has become all too easy lately, it is still a great way to filter through the market and look for deep discounts.
However, as always with investing, finding cheap-looking stocks only matters if the underlying business and its operations are sound and built for the long term.
With this high-quality focus in mind, let's look at three of my favorite businesses trading near their 52-week lows and offering serious multi-bagger return potential over the long haul.
1. Shopify
E-commerce enabler Shopify (SHOP -2.37%) is the first of our growth stocks trading near 52-week lows -- and down over 80% from its highs.
After increasing revenue by 110% in the first quarter of 2021, Shopify struggled to lap incredibly tough comparable figures to kick off 2022. Despite delivering 22% revenue growth in Q1 of 2022 on top of this blistering jump from the prior year, Shopify's stock continued languishing as operating expenses spiked 53% over the same period.
SHOP Total Operating Expenses (Quarterly) data by YCharts.
While this contrast between slowing sales growth and rising expenses may feel concerning, it is essential to zoom out over the past two years and realize that Shopify still managed annualized revenue growth of 60%.
Furthermore, these rising expenses -- specifically its research and development costs -- fuel one of the most robust growth optionality machines trading in the stock market today. Whether it is the company's logistical network, vast array of payment solutions, or growing list of sales channels, Shopify has far-reaching growth plans.
Yet, one may stand above them all. That's Shopify's expansion into international markets via its 9% stake in cross-border, direct-to-consumer specialist Global-e Online (GLBE -2.15%) in 2021. Thanks to this pairing -- joining Shopify's e-commerce capabilities and Global-e's ability to adapt to foreign markets, taxes, languages, payment options, currencies, etc. -- going from product idea to selling it worldwide has never been easier.
Despite still being in its infancy, tens of thousands of the company's 1.7 million merchants have already started using different Shopify Markets features, such as adding new geographies or localizing to a foreign market.
SHOP PS Ratio data by YCharts.
Trading at nine times sales, Shopify is still priced for growth but is trading near all-time lows for this specific valuation. As Shopify grows into its vast international potential, this steep decline in its price-to-sales ratio could represent an incredible opportunity for investors looking to buy and hold for life.
2. Axon Enterprise
Once known as TASER International, public safety specialist Axon Enterprise (AXON 1.27%) continues to grow thanks to its rapidly expanding (and high-margin) cloud segment. And its shares are up over 1,500% in the past decade, making it a wildly successful investment for long-term shareholders.
Despite this run-up in price, the company still looks like an intriguing proposition for investors due to its one-of-a-kind ecosystem that its Axon Cloud ties together. This includes its tasers, body cameras, fleet systems, dispatch operations, digital records, and evidence.com website. This vast array of solutions addresses everything from the initial interaction with a citizen through the legal process of addressing an incident.
In the first quarter of 2022, Axon posted impressive 32% year-over-year sales growth, but it was its software and sensors segment (Axon Cloud and cameras) that stole the show, jumping 48% over the same time. This impressive revenue growth is nothing new for the company -- as you can see in the chart below.
AXON Revenue (TTM) data by YCharts.
Although free cash flow (FCF) is yet to rise in tandem with sales -- primarily due to the investments needed to build out its cloud operations -- management is projecting an adjusted FCF of $125 million to $145 million in 2022. This cash generation would imply a roughly 13% FCF margin compared to its expected 2022 sales of $1 billion -- highlighting that its high-margin cloud operations look poised to bring long-lasting cash generation to investors.
3. Airbnb
As the idea of working from home continues to be increasingly common, many freelancers and employees are reconsidering what exactly home is to them. With unmatched workplace flexibility looking like it is here to stay, many people are turning to Airbnb (ABNB 0.10%) and its 4 million hosts to live their "work from anywhere" lifestyle to its fullest extent.
This nomadic approach to life seems to be thriving. The company recorded 70% year-over-year growth in revenue and a 67% increase in gross booking value in Q1 of 2022. But perhaps most exciting for investors, Airbnb turned this growth into a stunning $1.2 billion in FCF during its most recent quarter -- adding to its cash pile of $9 billion.
Despite this incredible growth and strong cash creation, Airbnb's stock still trades near 52-week lows. As the company continues to benefit from the pent-up demand from the pandemic, its combination of revenue growth and declining price-to-free cash flow (P/FCF) ratio should be appealing to investors.
ABNB Price to Free Cash Flow data by YCharts.
With the shares trading at a P/FCF ratio of 22 -- compared to the S&P 500's multiple of 35 -- and with guidance for 50% revenue growth in its second quarter, Airbnb looks like a fantastic value for investors.
