In the ever-shifting stock market landscape, uncovering undervalued growth stocks is like finding hidden treasure. These stocks, often overlooked, hold the potential for substantial long-term gains, offering a unique blend of safety and opportunity for savvy investors.
Our latest watchlist focuses on these unheralded market players. While some have already shown impressive growth in the past five years, they still present enticing opportunities for future returns.
Oracle (NYSE:ORCL) – A Strong Contender in Cloud Computing and AI
- Performance Overview: Oracle’s stock has shown impressive growth, more than doubling in the past five years and climbing 38% year-to-date.
- Cloud Computing Success: A significant driver of Oracle’s success is its cloud computing segment, now accounting for over a third of its total revenue. This shift towards cloud services has been a key growth catalyst.
- Recent Financials: In the first quarter of fiscal 2024, Oracle reported a 9% increase in revenue year-over-year. Notably, its cloud revenue surged by 30% compared to the same period last year, highlighting the company’s strong position in this sector.
- Generative AI Focus: Chairman and CTO Larry Ellison has emphasized the potential of Generative AI, considering it a groundbreaking technology. Oracle’s focus on this area positions it at the cutting edge of computer technology innovation.
- Efficient Cloud Infrastructure: The company’s Gen2 Cloud is witnessing strong demand and accelerated bookings. It stands out for its efficiency, reportedly training AI models twice as fast and at half the cost.
- Future Prospects: As the demand for artificial intelligence solutions grows, Oracle’s strategic positioning in this domain suggests a promising future.
- Investment Appeal: With a reasonable P/E ratio of 34 and a dividend yield of 1.4%, Oracle presents a balanced investment opportunity combining growth potential with income generation.
Fortinet (NASDAQ:FTNT) – A Resilient Player with Long-Term Potential
- Stock Trajectory: Fortinet’s shares have experienced volatility, peaking in August before declining by about 35% from their all-time high. Despite recent fluctuations, the stock is up 6% year-to-date and has grown 250% over the past five years.
- Financial Performance: Despite issuing conservative guidance in recent quarters, Fortinet’s financials remain strong. The company reported a 16.1% increase in revenue year-over-year in Q3, with net income rising by 39.4%, leading to a robust 24.2% profit margin.
- Valuation: Currently, Fortinet trades at a P/E ratio of 35, significantly lower than earlier in the year when it was above 60. The forward P/E ratio stands at 29, indicating a more reasonable valuation.
- Billing Growth Concerns: A key issue for Fortinet is the slowing growth in billings, which only increased by 5.7% year-over-year in Q3, a marked decrease from the usual 30%+ growth rates. This slowdown could signal reduced demand and potential future revenue declines.
- Q4 Expectations: While Q4 revenue growth may not match Q3’s 16.1% rate, Fortinet’s profitability and financial resilience position it to weather current market challenges.
- Outlook for 2024: If market conditions for Fortinet improve in the latter half of 2024, the stock has the potential for a significant rebound, making it a compelling option for investors with a long-term perspective.
Perion (NASDAQ:PERI) – A Hidden Gem in Ad-Tech with Strong Growth Prospects
- Consistent Growth: Perion, an ad-tech company, consistently delivers double-digit year-over-year growth in revenue and earnings. In the third quarter, the company reported a 17% increase in revenue and a 28% rise in net income.
- Financial Health: The company boasts a healthy 17% profit margin and shows potential for increased market share.
- Attractive Valuation: Despite its strong performance, Perion’s shares are attractively valued, trading at 12 times earnings and with a price-to-earnings-growth ratio (PEG) of just 0.40.
- Stock Performance: The stock has risen 13% year-to-date and has surged by nearly 900% over the past five years. Yet, it remains undervalued, suggesting more room for growth.
- Price Dynamics: Perion’s shares have seen a 52-week high of $42.75 but are currently trading around $28. This presents a potential 50% upside if the stock returns to its all-time high.
- Outlook: Given Perion’s strong earnings reports and low valuation, the likelihood of the stock reaching or surpassing its all-time high in the near future is high, making it an attractive pick for investors seeking growth at a reasonable price.
