Under-the-radar stocks that are issued by lesser-known companies can be great wealth builders for investors. Just being little-known, however, doesn’t make a stock a good under-the-radar pick. The best overlooked stocks are those that have shown consistent revenue and earnings-per-share (EPS) growth and trade at attractive valuations.
Most, but not all, of the stocks in this guide are small-cap stocks that aren’t household names, but they all have business models that point to continued success. Some of them have simply been overshadowed by popular companies in the same sector, even though they are showing better financial performance than their better-known competitors. Read on to discover 10 of the best under-the-radar stocks:
Here’s a quick overview of the 10 best under-the-radar stocks:Best Under-the-Radar Stocks to Buy in 2024
A Closer Look at the Top Under-the-Radar Stocks to Invest in
Let’s take a detailed look at the investment rationale behind each of the under-the-radar stocks we think are worth watching in 2024:
1. GigaCloud Technology – Pioneer Becoming a Supply Chain Star
The e-commerce tech pioneer’s GigaCloud’s service revenue from its GigaCloud 3P, its product revenue from GigaCloud 1P and off-platform e-commerce should be lifted by the transition from 4G to 5G. The company has grown its logistics and warehousing infrastructure, allowing it to provide smoother transactions for suppliers and resellers.
In 2023, the small-cap stock had revenue of $703.8 million, up 43.6%, and net income of $94.1 million, up 292.1% from 2022. Its GigaCloud 3P service revenue rose 92% year over year in the fourth quarter, to $69.3 million. Thanks to an increase in the number of the company’s sales channels, its product revenue from off-platform e-commerce was $87 million in the fourth quarter, up 179.7% over the same period last year.
Even though its shares have climbed more than 53% this year, it’s trading below 16 times earnings. Considering its growth potential, it still appears to be a bargain.
Ticker
P/E
Dividend Yield
NASDAQ: GCT
15.29
N/A
2. Comfort Systems – Construction Boom Fuels Its Cash Flow Growth
Comfort Systems USA is better known by its industrial clients than the general public. It benefits from the trend of businesses moving production back home, known as reshoring, the expansion of data centers, electric-vehicle battery production, and chipmaking. It has been quite active in acquisitions and has boosted annual revenue by 93% and annual EPS by 192% over the past five years.
Comfort raised its quarterly dividend by 2.5% last year to $0.25, raising it for the 11th consecutive year. It’s well covered with a payout ratio of only 9.8%.
Ticker
P/E
Dividend Yield
NYSE: FIX
35.12
0.32
3. Radcom – 5G Rollout Helped It Post Record Revenue, Turn Profitable
Radcom is using AI to develop cloud-native network intelligence offerings for telecom companies, including Rakuten, DISH, AT&T and Vodafone, that are rolling out 5G networks. The small cap has improved quarterly revenue for 16 consecutive quarters, and 2023 marked the first year it turned a profit. Its long-term contracts provide a solid backlog that should continue to drive revenue.
In 2023, Radcom had a record $51.6 million in revenue, up 11.9% and EPS of $0.24, up 50%. This year, the company is forecasting full-year revenue of between $56 million and $60 million, up 12.4% at the midpoint. Though it’s a small company and that presents some risks to investors, it has $82.2 million in cash and no debt.
Ticker
P/E
Dividend Yield
NASDAQ: RDCM
45.77
N/A
4. Napco Security Technologies – Bound for Growth Via Recurring Income
Napco sells high-tech electronic security equipment, mostly to businesses and schools. It’s an area that is booming, with the commercial security market expected to expand at a compound annual growth rate (CAGR) of 7.8% through 2028, according to a study by research firm MarketsandMarkets.
In the fiscal second quarter, it had revenue of $47.5 million, up 12.3% year over year, with recurring service revenue rising 25% over the same period last year to $18.5 million. Napco had $0.34 in EPS in the quarter, a jump of 209% year over year. The company, as of the end of 2023, had no debt.
Napco, buoyed by its strong finances, just raised its quarterly dividend by 25% to $0.10. If you invested $10,000 in Napco stock 10 years ago and reinvested its dividends, today you would have more than $119,030, a return of 1,090%.
Ticker
P/E
Dividend Yield
NASDAQ: NSSC
34.05
1.01%
5. JD.com – Big Chinese E-commerce Player Still Overlooked
The Chinese company, commonly known as Jingdong, specializes in e-commerce directly to consumers. It directly controls its inventory and logistics, which leads to higher margins, and it’s using innovative technologies like drones and autonomous vehicles for its logistics. It’s one of the few large-cap companies on this list. It trades at less than 13 times earnings, though, indicating that it may be undervalued. JD has posted strong results this year, even while the Chinese economy is mired in a slump.
At its low P/E ratio, the stock appears to be a bargain, especially considering the expected growth of the middle class in China. The company has said it plans to buy back $3 billion of its stock over the next three years and it raised its quarterly dividend by 22.5% this year to $0.76.
Ticker
P/E
Dividend Yield
NASDAQ: JD
12.77
2.73%
6. NewLake Capital Partners – Outperforming Its Main Cannabis Rival
NewLake provides capital to cannabis growers by buying their properties and then renting them back to them with long-term triple-net leases that put most expenses on the renters. The continuing growth of cannabis sales in the U.S., as more states open to medicinal or adult-use marijuana sales, or both, helps NewLake, regardless of which grower businesses prosper.
NewLake has outperformed its larger cannabis REIT rival Innovative Industrial Properties. Despite recent gains in its share price, it still trades at less than 10 times its price-to-AFFO ratio, indicating that it might be attractively priced.
NewLake just got good news from the Florida Supreme Court, which ruled that Amendment 3 can be put on the state’s ballot next fall to allow adult-use sales. The state already allows medical-use sales and had $2.5 billion in 2023 sales. NewLake estimates that if approved, adult-use sales would grow to more than $6 billion in annual sales in Florida where it has several tenants, including Trulieve, Curaleaf, Cresco, AYR and the Cannabist.
Ticker
P/E
Dividend Yield
NASDAQ: NLCP
17.82
8.55%
7. Greenbrier Companies – On Track for Another Strong Year
Greenbrier, a small-cap stock valued at only $1.64 billion, has a fleet of more than 14,000 railcars that it leases out with its fleet having a remaining average lease term of 4.1 years. That comes in addition to its core business of making railcars and providing maintenance services for them. The company helped pioneer the use of double-stack railcars.
In terms of its valuation, it appears to be a bargain, considering its steady cash flow, and that it’s trading below 17 times earnings. Greenbrier raised its dividend by 11% last year to $0.30, and over the past decade, its dividend has doubled.
Ticker
P/E
Dividend Yield
NYSE: GBX
16.20
2.28%
8. Photronics – Unique Product, Strong Beneficiary of AI, 5G Growth
Photronics makes photomasks, used to make integrated circuits (IC) and flat panel displays. It has plants in the U.S., Taiwan, Korea and Europe. Photronics is a small-cap stock, but it has big growth potential due to rising need for advanced chips.
In the fiscal second quarter, Photronics is expecting revenue to rise to between $226 million and $236 million, a jump of 6.7% from the previous quarter at the midpoint, and a slight increase from the same year-earlier quarter at the midpoint. Over the past three years, the company has increased its operating margin by 160% and quarterly EPS by 237%. Despite that growth, it trades for less than 13 times earnings.
Ticker
P/E
Dividend Yield
NASDAQ: PLAB
12.70
N/A
9. Cogent Communications – Betting on Big Expansion with Sprint Assets
Cogent manages one of the largest fiber optic networks in the U.S. and it focuses on low-cost, high-speed Internet access, private network services, and data center colocation space and power. The company made a controversial move when it purchased Sprint’s legacy wireline assets from T-Mobile for $1 and updated them. Cogent’s shares tumbled on the news because that side of T-Mobile’s business was unprofitable. However, last year, Cogent reported it gained $1.4 billion last year from the move.
It has one of the best dividends that most investors don’t know about, delivering an above 6% dividend yield. Cogent has increased its dividend for 46 consecutive quarters. On top of that, the stock trades for less than only three times earnings.
Ticker
P/E
Dividend Yield
NASDAQ: CCOI
2.36
6.14%
10. MGM Resorts International – A Solid Bet With Good Financials
Las Vegas casino operator MGM Resorts International, which also runs casinos and resorts across the U.S. and in China and Japan, is quite well known, but it’s being overlooked, in my opinion. It’s expected to benefit as China continues to rebound from the COVID-19 pandemic and its current economic doldrums. Gamblers from mainland China continue to travel to MGM’s casinos in Macau. The growth of online sports gambling in the U.S. also helps MGM as its sports betting and iGaming brand is in 28 North American cities and on Carnival Cruises.
MGM Resorts is trading at under 15 times earnings and considering the potential growth drivers it has, that looks like a bargain.
Ticker
P/E
Dividend Yield
NYSE: MGM
14.66
N/A
How to Pick the Best Under-the-Radar Stocks
Finding solid under-the-radar stocks takes more research than run-of-the-mill stock investing. Many of the best under-the-radar stocks have little written about them, they aren’t covered by analysts and don’t have as long a track record as the typical S&P 500 company.
Overlooked stocks, though, can be great options for investors looking for strong growth potential. These lesser-known stocks are often smaller companies can also come with risk, particularly that of higher volatility. There are ways, though, to mitigate these risks.
Look for Advantages
Search for lesser-known stocks that are in growth industries that have an obvious route to expanding their market share, either because they have a moat, a unique product or are benefitting from a new technology.
JD.com, for example, benefits because it’s well suited to capture the expected expansion of the e-commerce market, driven by a growing middle class in Asia, and in particular, in China.
Greenbrier Companies, on the other hand, has a unique niche market that isn’t easy to break into. Photronics has a unique product with a growing technology that is in demand. NewLake Capital Partners benefits from the expansion of cannabis sales, driven by a wave of legalization in more and more U.S. states, and the need of marijuana growing companies for capital.
Check Under the Hood
Companies that are small or overlooked may have fewer cash reserves, making them a bigger risk than larger companies. However, if you can find well-performing, lesser-known stocks with consistent revenue growth and EPS growth, you can get in on a stock before it soars, and that’s a good way to build wealth. All of the stocks on this list have grown revenue by 24% or more over the past three years.
Sometimes under-the-radar stocks have an advantage over larger stocks because they can more quickly adapt to market trends. Two examples of this in the above list are Gigacloud Technology and Radcom, both of which are benefiting from the current push to 5G networks.
Know the Risks
There’s less information, obviously, on under-the-radar stocks, so it behooves investors to dig a little deeper into company reports and industry trade publications before taking a plunge and buying stock in these companies.
Under-the-radar shares can be risky investments, particularly in the short term, because they are more volatile due to their generally smaller market caps. Their relatively smaller size makes it more difficult to quickly exit a position in under-the-radar stocks.
Where to Get Under-the-Radar Stock Picks and Insights
To gain an edge in finding the best under-the-radar stocks, we recommend checking out AltIndex.
AltIndex provides stock picks, alerts, and insights using alternative data. This means that it analyzes social media and other websites, app downloads, customer satisfaction ratings, and other data points regarding a company.
It tracks this data over time, compares it to other companies, and then uses machine learning to generate investment insights. Stocks are given a ranking score out of 1 to 100, simplifying the analytical process that can often be very difficult for stock investors.
With over 10k members, AltIndex is a widely used and trusted service. It provides over 100,000 unique daily stock insights and alerts, and has a very impressive win rate of 75% from its AI stock picks.
You can try AltIndex’s Starter Plan for just $29 a month and receive stock picks directly to your email, as well as a range of other useful features.
Conclusion
Finding a great under-the-radar stock can be a solid way to gain wealth. Generally, these stocks haven’t yet been discovered, so they’re not overpriced. The critical point is you still need to find companies with solid, dependable returns that can be repeated and improved upon.
Look for companies that have established a niche for themselves and are improving their revenue and earnings per share. Many under-the-radar stocks don’t have huge cash reserves, so they don’t handle big financial downturns as well. To prevent picking the wrong under-the-radar stock, find companies that should benefit from long-term trends.
References
https://www.marketsandmarkets.com/Market-Reports/commercial-security-system-market-234307144.html
https://www.cogentco.com/files/docs/about_cogent/investor_relations/reports/10k_report_2023.pdf
