A Look Back at a 100 Bagger Stock

in Public  by Anh HOANG 0 comments

Many investors keep trying to find 100 baggers. For companies with an excellent management team, growing dominant market position in the niche market, having products that customers trust and love, 100-bagger will happen sooner or later. If a stock does 100x in 33 years, it is compounding 15% per year, which is already extremely good. However, there are several exceptional businesses which is doing that much faster. Today we will look at one of them.

Source: Google Finance

XPEL manufactures and distributes automotive surface and paint protection, automotive and architectural windows films, and ceramic coatings. The company had moved its focus from selling its DAP film cutting software to selling its own PPF products. It used a direct distribution method, selling directly to installers. Its DAP cutting software also helped installers to cut precise film patterns to save time and increase precision. The company had no customer concentration, and the customer switching cost and barrier to entry were high. In addition, it had established a dominant market position. There were also a lot of growth opportunities in international market expansion.

In 2014-2015, it was a pretty small company, but the growth was quite good. From 2008 – 2015, its total sales had grown from $3.5 million to $41.5 million, 42.4% CAGR. The company turned profitable in 2009. Its operating income increased from $170k in 2009 to $2.7 million in 2015. During that time, its return on capital had been superb, staying in the range of 18% – 36%.

Source: TIKR

Because it was small and traded only in Canada on the TSX Ventures and over-the-counter market in the U.S, not a lot of investors noticed it. Although demonstrating high growth, in the first quarter of 2016, it was valued cheaply on the market, with only 0.54x sales multiple and 8.5x EBIT multiples, around $1 per share, with only about $30m in enterprise value.

Fast-forward to today, XPEL is trading at $100 per share, with a $2.78 billion in enterprise value. Its current valuation is much higher. LTM Sales multiple reaches 15.2x, and the EBIT multiple balloons to 94x.