Online shopping has grown like gangbusters in the last decade.

According to the e-commerce platform Shopify, 20.8% of global retail sales are expected to be made online in 2023, up from 17.8% two years ago.

By 2025, that number is projected to hit 23%, providing a powerful tailwind for retailers over the next few years.

One category within retail that has a ton of promise online is fashion, an industry that was valued at over $1.7 trillion in 2022.

As more consumers start buying fashion items online, there will be hundreds of billions in revenue for e-commerce retailers to go after.

Here's why growth investors should check out the under-followed online fashion company Revolve Group (RVLV 5.06%) for their portfolios in 2023 as a way to ride this trend. 

Revolve Group: Benefiting from online fashion sales

Revolve started in 2003 as an online-only retailer focused on selling apparel and other fashion goods to younger women.

Since then, it has steadily grown by riding the online shopping wave, hitting 2.2 million active customers over the past 12 months, up from just 1 million in 2018.

Last quarter, the business had $269 million in revenue, up 10% year over year, and net income of $12 million. Net income has been positive every quarter since the company went public a few years ago, even in the heart of the COVID-19 lockdowns (which greatly hurt fashion sales), a rare occurrence among growth companies.

Over the last 12 months, Revolve has generated approximately $85 million in net income.

What has separated Revolve from the pack (especially from legacy retail brands) is its embrace of social media influencers through its brand ambassador program.

Social media apps like Instagram are a key source younger women turn to for inspiration when buying clothes today.

Revolve has started a program where it partners with individual accounts to promote Revolve clothing, rewarding those influencers with commissions on item sales. It recently expanded this program to its higher-end Forward brand as well.

Given all these factors, I think it is plausible that Revolve could double its annual customer count within five to seven years as online shopping continues to grow in popularity. This should lead to a doubling in sales -- if not more -- over that time as well. 

2023 could be tough, but that may already be priced in

Revolve's stock is down 60% in the past year, underperforming all relevant indexes.

Investors are likely nervous about how a recession and high inflation could affect Revolve over the next year. This has already hurt margins, with operating margins down to 9% compared to around 12% a year ago.

Management also updated investors in its latest earnings report that revenue only grew 3% year over year in October, which is a slowdown from the third quarter.

While these developments should be tracked, I think it is likely that all this pessimism is already priced into the stock.

It would have been painful to hold the stock this year, but Revolve Group is still growing sales and generating positive net income. It is not at risk of going bankrupt, like many unprofitable growth stocks are right now.

In fact, if revenue growth remains positive in 2023, I wouldn't be surprised to see shares be higher 12 months from now given how bombed-out the stock is. 

But investing for the long term isn't just about what will happen next year. 

Valuation is not crazy at these prices, looking a few years out

With the stock down 60%, Revolve trades at a market cap of $1.67 billion. Subtract its net debt of $244 million, and the stock has an enterprise value of $1.43 billion.

Compared to trailing net income of $85 million, that gives the stock a trailing enterprise-value-to-earnings (EV/E) of 17.

Yes, 2023 might not end up being the best year for Revolve Group, but the company has a solid track record of growing its number of customers and its revenue over the last decade-plus.

If revenue grows by 10% over the next three years (which is slower than its historical rates) and the company can achieve a 10% net income margin in 2025, that will equate to $141 million in annual net income or an EV/E of 10, based on the stock's current enterprise value.

From my seat, that looks like a cheap price for a growth company, and Revolve Group stock might be much higher a few years from now