While the market theoretically prices in all publicly available information for all securities, the sheer volume of opportunities available breathe life into underrated stocks with potential. Put another way, the below enterprises are Wall Street’s equivalent of brown guacamole. As I like to say, they’re brown on the outside, sound on the inside.
Just like that box of loaded carne asada fries that you put in the refrigerator last night, you know that the guac is good. It’s been less than 24 hours since you put those bad boys in the fridge. Of course, the hesitation is that the leftovers look rotten. That’s the same idea with the below hidden gem stocks. They may be printed red ink on the charts but the underlying fundamentals ring solid. Now, with brown guacamole, eating it helps you avoid wasting food, which is good but not particularly profitable. On the other hand, acquiring overlooked stocks for investment may lead to significant gains.
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On paper, SentinelOne (NYSE:S) doesn’t seem to be one of the underrated stocks with potential. Rather, it would seem that everyone should at least consider owning shares. Per its public profile, SentinelOne’s cybersecurity solutions encompass AI-powered prevention, detection, response and hunting across endpoints, containers, cloud workloads and Internet of Things (IoT) devices in a single autonomous extended detection and response (XDR) platform.
However, S stock hasn’t delivered in the charts. Since the beginning of this year, S slipped almost 8%. And in the trailing one-year period, the security gave up nearly 44% of equity value. According to Reuters, SentinelOne posted quarterly revenue growth of about 70% in the first quarter. It also predicted a slower rise of 38% in Q2. Both figures missed estimates, in large part due to stiff competition and a tough economy.
Still, it’s important to consider the bigger picture for SentinelOne. According to McKinsey & Company, at the current rate of growth, cyberattacks will lead to financial damages of about $10.5 trillion annually by 2025. This represents a 300% increase from 2015 levels. So yes, SentinelOne does feature heavy competition. But the total addressable market is massive. Thus, S ranks among the hidden gem stocks.
BioNTech (BNTX)
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Thanks to the company’s contribution to the Covid-19 vaccine, BioNTech (NASDAQ:BNTX) – which wasn’t the most well-known biotechnology enterprise prior to the pandemic – skyrocketed to fame. However, with fading fears of the SARS-CoV-2 virus came sharply eroding relevance, at least as far as vaccine sales were concerned. Unsurprisingly, BNTX gave up more than 27% of equity value since the beginning of this year.
Indeed, you can see the damage in the financials. Sure, if you peruse BioNTech’s fiscal summary on Gurufocus, its three-year revenue growth rate pings at 404.7%. As well, its book growth rate during the same period impresses at 230.6%. However, drilling into the details, investors will note that for Q1 2023, the company posted revenue of only $1.37 billion.
Unfortunately, that’s a glaring gap from the over $7 billion in sales posted in the year-ago quarter. Again, you can see how much fortunes have changed for the company since Covid fears diminished. Nevertheless, BNTX is one of the underrated stocks with potential because BioNTech can potentially leverage its acumen for other innovations. Notably, analysts peg BNTX a moderate buy. As well, their average price target clocks in at $156.25, implying almost 45% upside potential. Thus, BNTX is one of the overlooked stocks for investment.
Valens Semiconductor (VLN)
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A leading provider of semiconductor products, Valens Semiconductor (NYSE:VLN) claims to push the boundaries of connectivity by enabling long-reach, high-speed video and data transmission for the audio-video and automotive industries. Still, it’s one of the deeply underrated stocks with potential. Despite broad tech relevancies, VLN lost almost 47% of equity value since the Jan. opener. In the trailing year, it’s down nearly 29%.
Nevertheless, investors specifically seeking potential high-growth stocks should give VLN a closer look. For one thing, Valens benefits from a robust balance sheet. Most notably, its cash-to-debt ratio pings at 104.33, ranked better than 87.76% of companies listed in the semiconductor industry. Also, its Altman Z-Score comes in at 7.72, indicating high stability and low risk of bankruptcy.
To be fair, Valens suffers from a three-year revenue growth rate (on a per-share basis) of 43.5% below zero. However, nominally the company has been aggressively expanding the top line since 2020. Also, it’s worth pointing out that Valens’ three-year EBITDA growth rate impresses at 49.1%. On a final note, analysts peg VLN as a unanimous strong buy. Their average price target lands at $5.75, implying nearly 145% upside potential. Thus, VLN makes a great case for unpopular stocks to buy.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
