Jhe stock market is notorious for its volatility, but it might as well give investors a boost due to the speed at which it rises and falls. the Nasdaq Compound the index fell in the first three months of 2022, dropping 20% in mid-March. After that, it bounced back. As of this writing, it’s only down 10% since the start of the year.
Predicting where the market will go over the next week or month is nearly impossible, so buying companies you trust over the next five years is often the best strategy. With that in mind, you should have a watchlist full of stocks that you’re ready to buy, no matter what the stock market does next.
My watchlist is full of companies right now, but Figs (NYSE: FIGS) and Fiverr (NYSE: FVRR) are near the top of it.
Figs holds a unique position with one of the strongest brands in a niche market. The company sells hospital scrubs for nurses and other healthcare professionals, but it carries two hallmarks: a strong brand that no competitor has been able to match, and a benchmark product in the industry. The company’s Net Promoter Score (NPS) – which measures customer satisfaction on a scale of -100 to 100, with a score of 70 being considered “world class” – was above 80 at the end of 2021. That’s phenomenal , beating even some of the strongest brands. Platoon only has an NPS of 68.
Fig scrubs are much better quality than its competitors. The company realizes that its customers wear its products every day, often for 10 hours or more, so it prioritized comfort and utility. Thanks to this quality and brand name, Figs was able to price its products at a pretty penny: the company achieved a gross margin of almost 72% in 2021.
To be clear, Figs faces fierce competition and pushback from price-sensitive buyers. Another scrub maker, Jaanuu, may be more appealing to the price-sensitive consumer, and Figs’ scrubs being a few dollars more expensive than its counterpart could hurt the business. Yet Jaanuu has yet to achieve the Figs level of brand recognition, which is a major selling point.
The adoption of the company by healthcare workers has been nothing short of impressive. Figs had 1.9 million active customers in Q4 2021, which generated nearly $420 million in revenue for the year, up 60% from a year ago. And now the company has expanded into a wider range of products, offering everything from outerwear to lifestyle products like sweatshirts and joggers that can be worn outside of work. Lifestyle products accounted for just 17% of revenue in the fourth quarter, but management believes this segment is just getting started.
With a US healthcare apparel market worth $12 billion, Figs still has plenty of room for growth. The company also aspires to expand internationally, which could boost its opportunity to $79 billion.
There’s no doubt that the potential for the business is immense, and given that Figs trades at just 8.6x sales – not much more than other apparel companies like lululemon — it’s at the top of my watch list, and it should be on yours too.
Fiverr has been hammered recently, dropping more than 77% from its January 2021 all-time high. COVID-19 pandemic.
However, as the world began to reopen, many investors lost faith in the company, thinking demand for its services would decline. On the contrary, Fiverr has enjoyed continued success. Fiverr reported record revenue of $298 million for 2021, which was up 57% from 2020.
One of the drivers of this development has been the increase in the company’s participation rate – the share of revenue that Fiverr reserves for each transaction – which now exceeds 29%. Considering active buyers on the platform grew 23% year-over-year at the end of 2021, the value Fiverr brings to its buyers seems worth the price hike.
The company lost $65 million in 2021, but that’s not as worrying as you might think. Its free cash flow of $35.4 million in 2021 can fuel most of that loss, and the $192 million in cash and securities on its balance sheet could help fund the rest.
It’s clear that Fiverr’s service is still valuable to millions of businesses around the world, and that might not change as long as freelancers continue to love working from home. At nine times sales, the stock looks particularly attractive today. Investors might consider owning this company even as the market continues to rise and fall over the next few months.
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Jamie Louko owns FIGS, Inc. and Fiverr International. The Motley Fool owns and recommends Fiverr International, Lululemon Athletica, and Peloton Interactive. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.