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From london Alternative Investment Market (AIM) is a place where many ‘under the radar’ stocks have hidden potential to beat the stock market. So here are three AIM stocks I’ve put on my watch list to do just that in 2023.
1.Go2
Like the rest of the travel industry, stocks of Jet2 (LSE:JET2) have been performing well recently. The stock is up 30% year to date and for good reason too. Their most recent business update was a momentous occasion. That’s because it’s the first. FTSE-Airline listed to see its load factor finally exceed pre-pandemic levels.
Apart from that though, the low-cost carrier also reported strong vacation package sales and advance bookings. More importantly, the AIM stalwart shared that he now anticipates earnings to beat analyst estimates of £317m. The firm now forecasts pre-tax earnings between £370m and £385m. Combine that with an immaculate balance sheet and Jet2’s stock certainly looks lucrative for my portfolio.
To make things sweeter, the low-cost airline also has very favorable valuation multiples. As such, it is no surprise to see barclays rating the shares a ‘buy’ with a £13.50 price target. While this is only 10% up from its current levels, I believe the potential for AIM action is much greater. Therefore, buying at these levels would still give me a good chance to beat the FTSE 100which averages a 7% annual return.
| Metrics | valuation multiples | industrial average |
|---|---|---|
| Price-to-book (P/B) ratio | 2.0 | 1.8 |
| Price-Sales Ratio (P/S) | 0.6 | 0.9 |
| Price-Earnings Ratio (P/E) | 15.9 | 11.5 |
| Price/Forward Sales (P/S) Ratio | 0.5 | 0.9 |
| Forward price-earnings (P/E) ratio | 10.8 | 27.3 |
2. On the beach
On the beach (LSE:OTB) has also performed well. Shares of the online beach vacation retailer have soared an impressive 85% from their October low.
Firm AIM is taking that strong momentum through to 2023 after its latest Q1 update, in which its share price rose another 10%. The company posted higher bookings in what is typically its quietest quarter of the year, along with strong forward bookings and higher total transaction value (TTV).
In addition, the group saw growth in its premium, long distance and B2B offerings, which tend to be higher margin products. As a result, I expect growth in these areas to lead to margin expansion, which should lower their high multiples.
| Metrics | valuation multiples | industrial average |
|---|---|---|
| Price-to-book (P/B) ratio | 1.8 | 1.8 |
| Price-Sales Ratio (P/S) | 2.0 | 0.9 |
| Price-Earnings Ratio (P/E) | 181.1 | 11.5 |
| Price/Forward Sales (P/S) Ratio | 1.7 | 0.9 |
| Forward price-earnings (P/E) ratio | 19.8 | 27.3 |
Either way, I think the travel agency’s stock has the potential to beat the market given its strong balance sheet and demand for travel. After all, In the sky He rates it a ‘Buy’ with a £2.60 price target, putting it up 50% from current levels.
3. Sosandro
Another AIM stock I’m eyeing is the fashion house sosandro (LSE: SOS). The clothing firm’s shares are already up 30% this year thanks to its mega deal with Sainsbury’s.
The fashion label recently signed a deal with the UK’s second largest retailer, entering into a wholesale deal to sell its products. Although the initial rollout will be slow, the upside potential is certainly there to be realized. This is especially the case once his clothes start hitting select store shelves later this year. Higher sales figures would then bring the shares’ current high multiples down to more reasonable levels.
| Metrics | valuation multiples | industrial average |
|---|---|---|
| Price-to-book (P/B) ratio | 5.4 | 1.5 |
| Price-Sales Ratio (P/S) | 1.5 | 0.7 |
| Price-Earnings Ratio (P/E) | 58.0 | 18.3 |
| Price/Forward Sales (P/S) Ratio | 1.2 | 0.7 |
| Forward price-earnings (P/E) ratio | 31.2 | 18.1 |
Combine that with its strong financials, and it’s no surprise that Sosander’s shares have an average price target of 35 pence. With a 32% advantage, he certainly has the potential to beat the market as well.
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