Most investors have heard about Nvidia (NASDAQ:NVDA). Surging revenue growth, a 10-for-1 stock split, a leading position in the AI boom and a 3,300% gain over the past five years have resulted in a lot of coverage.
Sometimes, you can continue to beat the market by picking the top names. It’s certainly worked for anyone who bought Nvidia stock at the beginning of the year, as it’s currently up by 166% since the start of 2024.
However, you don’t need to pick the tech giants to outperform the stock market. Investing in lesser-known stocks can also lead to market outperformance and diversify your portfolio away from the common names. Buying shares in smaller companies can also result in meaningful bargains since not all investors have caught onto the opportunities. These are some of the lesser-known stocks to buy that demonstrate great promise and have the potential to outperform the stock market for several years.
Comfort Systems USA (FIX)
Comfort Systems USA (NYSE:FIX) has been outperforming the stock market for a while. Shares are up by 57% year-to-date and have gained 535% over the past five years. The company offers heating, ventilation and air conditioning services. Its services continue to gain demand based on 31% year-over-year (YOY) revenue growth in the first quarter. Net income came to $96.3 million, a 68% YOY improvement.
The firm also offers a quarterly dividend and tends to hike its dividend twice per year instead of the standard annual hike. Comfort Systems USA recently raised its quarterly dividend from $0.25 per share to $0.30 per share. That’s a 20% increase.
The stock hasn’t received much attention from analysts. It has one Buy rating and three Hold ratings. One of those hold ratings is from July 2023, while the most recent rating is from April 29, 2024. Investors have an opportunity to scoop up shares before Wall Street notices.
CommVault Systems (CVLT)
CommVault Systems (NASDAQ:CVLT) is another largely unheralded growth stock that has outperformed the market. The cloud security firm’s shares are up by 49% year-to-date and have gained 143% over the past five years. CommVault Systems has a 31.5 P/E ratio and is valued at $5 billion.
The stock is rated as a Moderate Buy based on the ratings from six analysts. This low coverage demonstrates how little attention the stock is currently getting. The highest price target of $140 per share suggests that CommVault Systems can gain an additional 18.3% from current levels.
Rising annual recurring revenue suggests that the firm can continue its stretch. Revenue increased by 10% YOY in the fourth quarter of fiscal 2024. The company’s total annual recurring revenue for fiscal 2024 came in at $770 million, 15% higher than fiscal 2023’s annual recurring revenue. CommVault Systems anticipates total annual recurring revenue will grow by 14% YOY in fiscal 2025.
Duolingo (DUOL)
Duolingo (NASDAQ:DUOL) isn’t as much of a secret as the other picks. It’s rated as a Moderate Buy among eight analysts with higher price targets from recent ratings. The average price target implies a 20% upside for the educational tech company.
Duolingo makes it easier for people to learn new languages with various verbal and written exercises. The company’s gamified approach entices people to log into their accounts every day and complete additional lessons. Those efforts have been attracting many users to the app. Daily active users increased by 54% YOY in Q1 2024 to reach 31.4 million individuals. Monthly active users totaled 97.6 million, up 35% YOY.
The company also did well with its financials. Revenue growth remained strong and was up 45% YOY. Net income continues to remain positive, going from a net loss of $2.6 million in Q1 2023 to a $27.0 million profit in the most recent quarter.
On this date of publication, Marc Guberti held long positions in FIX and CVLT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
