The stock market is filled with sleeper stocks that present tempting opportunities.
Some investment ideas receive much of the spotlight. Ever since Nvidia reported first-quarter earnings and the rising demand for artificial intelligence, it has received renewed attention from investors.
The issue with stocks like Nvidia is that most investors already know about them. Nvidia currently carries a 225 P/E ratio, making it far from undervalued.
The high valuation doesn’t give Nvidia much of a margin for safety, if any at all. That’s what happens when investors pile into a company.
However, there are some sleeper stocks that don’t receive the same type of fanfare. These stocks have more reasonable valuations, and some of them have better financials than the stocks in the spotlight.
These are three game-changing sleeper stocks to buy now for the potential of high returns.
Perion (PERI)
Perion (NASDAQ:PERI) is an ad-tech company that has double-digit revenue and earnings growth and a low valuation.
If more people knew about the stock, it could double based on its valuation alone.
Perion trades at a 15 P/E ratio, a forward P/E ratio of 12, and a 0.50 PEG ratio. These are good metrics for a company that consistently outperforms its guidance and has a double-digit profit margin.
Perion makes its money from digital advertising — search, social, and display ads. Second-quarter revenue jumped by 22% year-to-date, and EBITDA surged by 45% year-to-date. GAAP net income also increased by 10% year-over-year.
Some segments of the firm experienced incredible growth. CTV ad revenue increased by 104% year-over-year, retail media revenue jumped by 63% year-to-date, and Perion’s AI-based cookie-less targeting solution experienced an 84% year-over-year revenue increase.
Perion regularly reports earnings results like these, and yet it only has a $1.5 billion market cap.
Perion’s valuation and market cap are even more mind-boggling when you consider that it has roughly the same valuation as Nikola Motors (NASDAQ:NKLA), a company that only delivered 111 trucks in the second quarter.
Deere & Company (DE)
Deere & Company (NYSE:DE) doesn’t look like a winner if you look at the year-to-date or 1-year performance charts.
Shares have fallen by 6% year-to-date and are only up by 7% over the past year.
Even with the sluggish performance over the past year, shares have gained more than 170% over the past five years. The recent performance has also helped stocks hold onto a 13 P/E ratio and a 1.25% dividend yield.
The valuation has potential, but what about the underlying earnings? Deere & Company recently delivered another strong quarter that featured roughly 60% year-over-year net income growth.
Deere & Company also raised its guidance for full-year net income from $9.75 billion to $10 billion. Investors still sent the stock lower over fears of slowing sales moving forward. However, the company has been performing well and has a reasonable valuation.
Deere & Company has been a sleeper stock over the past year, but its finances are still strong.
Inmode (INMD)
Inmode (NASDAQ:INMD) has a muted 6% year-over-year return. That might be good for some investments, but the stock has gained more than 400% over the past five years. The Israeli-based company has a $3 billion market cap, 17 P/E ratio, and 14 forward P/E ratio.
Inmode produces medical devices that help with plastic surgery, gynecology, dermatology, and other procedures. The company’s growth is fine, as it recently experienced record-breaking revenue. The achievement translates into 20% year-over-year revenue growth.
GAAP net income also broke a record. The company’s $55.7 million in GAAP net income exceeded the company’s $40.0 million GAAP net income from the same time last year. The change represents 39.2% year-over-year growth.
Inmode is smashing records, doesn’t have debt, and holds onto a $629.4 million cash position. That cash position makes up more than 20% of the stock’s market cap.
Shares briefly traded in the mid $90s back in 2021. Inmode’s continued growth suggests it can reclaim that level. A move back to the all-time high would benefit long-term shareholders immensely.
On this date of publication, Marc Guberti held long positions in PERI and INMD. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.