3 Under-the-Radar Stocks Ready to Outsmart the Market

Big Tech is attracting attention under the name of artificial intelligence (AI) have helped several tech giants achieve multi-billion dollar valuations. The three most valuable publicly traded companies are all investing heavily in AI, and it’s no secret at the moment.

Many investors know Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), And Nvidia (NASDAQ:NVDA). Even though these stocks have generated incredible returns over the long term, there is a problem with relying solely on big-name companies.

It is possible to generate much higher returns if you allocate some of your capital to smaller businesses. While Nvidia is a household name today, that wasn’t the case just a few years ago. Buying household names before they become household names can be very lucrative for patient investors.

Some hidden gems continue to show excellent revenue growth while boasting high profit margins. Investors looking to diversify their portfolios into little-known stocks may want to take a look at these picks.

CommVault Systems (CVLT)

CommVault Systems (NASDAQ:CVLT) is a cloud security platform that protects businesses’ digital assets and helps them monitor their cloud data from a centralized dashboard. The stock has a market cap of $5 billion and a P/E ratio of 30.5. This is up 49% since the start of the year (YTD) and has gained 140% over the past five years.

CommVault Systems’ annual recurring revenue is growing rapidly. This figure recently rose to $770 million, an increase of 16% year-over-year (YOY) improvement. The increase in annual recurring revenue gives the cloud security company a solid foundation to report higher revenue and profit growth in subsequent quarters.

The company recorded 10% year-on-year revenue growth in Q4FY24 to reach $223.3 million in sales. Total annual recurring revenue increased 2.3% sequentially and continues to increase each quarter. Year-over-year revenue growth accelerated in all markets: Americas and International. Higher revenue growth and rising net income — the company reported net income of $23.0 million before a tax windfall — suggest CommVault Systems can extend its rally.

Comfort Systems United States (FIX)

Comfort Systems United States (NYSE:FIX) offers the installation and management of ventilation, air conditioning and heating for industrial and commercial clients. THE Russell 2000 This member has a market cap over $11 billion and trades at a P/E ratio of 32. It trades like a large technology company, with shares up 61% year-to-date and a gain over 5 years of 563%.

The stock only has a yield of 0.37%. But it tends to increase its dividend twice a year. Comfort Systems USA recently increased its quarterly dividend from 25 cents to 30 cents per share, a 20% improvement. The company only paid out 25 cents per share over two quarters. Before that, the company paid a quarterly dividend of 20 cents per share.

Additionally, Comfort Systems USA continues to demonstrate impressive financial growth. Revenue rose 31% on an annual basis to $1.54 billion in the first quarter. Net profit was $96.3 million, an improvement of 68% year-on-year. Additionally, FIX has a strong order backlog of $5.91 billion, suggesting that revenue growth should be taken into account. The backlog of $5.91 billion represents a 33% year-over-year improvement over the company’s backlog of $4.44 billion in the same quarter last year.

Texas Roadhouse (TXRH)

Fast food stocks have gained a lot of momentum as investors search for the next Chipotle(NYSE:GCM). Even though several fast food stocks have posted gains outpacing those of tech over the past five years, there is a problem. Many of these same fast food stocks now have excessive valuations that suggest limited upside and no margin of safety.

It’s there that Texas Truck Stops (NYSE:TXRH) is different. Its year-to-date gain is slightly lower than Chipotle’s. However, this figure still stands at a staggering 43%. Additionally, Texas Roadhouse stock has more than tripled over the past five years. Despite these gains, the steakhouse chain still has a P/E ratio of 35 and a yield of 1.43%. Additionally, Texas Roadhouse recently increased its quarterly dividend from 55 cents to 61 cents per share. This represents an increase of 10.9% on an annual basis.

Additionally, Texas Roadhouse reported strong financial results. Revenue for the first quarter of 2024 increased by 12.5% ​​year-on-year while net profit increased by 31.0% year-on-year. These growth rates are similar to those reported by Chipotle, and yet Texas Roadhouse has a much lower valuation. As Texas Roadhouse expands its footprint through company-owned and franchised restaurants, the stock price is expected to continue to rise.

At this publication date, Marc Guberti held long positions in CVLT, FIX and TXRH. The opinions expressed in this article are those of the author, subject to InvestorPlace.com’s publishing guidelines.