The stock market is filled with many opportunities. Some investments have helped people accumulate generational wealth, and the most successful mega-cap stocks are quite popular. These tech giants make up the Magnificent Seven, and they’ve been propelling the S&P 500 and Nasdaq Composite to new heights for several years.
Investors can even buy an ETF that specifically focuses on these seven companies. The Roundhill Magnificent Seven ETF (NASDAQ:MAGS) has outperformed both indices with a 35% year-to-date gain.
While investing in reliable, well-established corporations can lead to solid gains, it’s possible to generate a higher upside with low-key stocks. Hidden gems that go relatively unnoticed can deliver solid long-term returns.
Many of these under-the-radar stocks to buy have lower valuations than the most popular mega-cap stocks. They also aren’t members of the S&P 500, but it’s possible for them to get added in the future. Investors looking for opportunities hidden in plain sight may want to consider these high-potential growth stocks.
Sezzle (SEZL)
Sezzle (NASDAQ:SEZL) is a fintech firm specializing in “Buy Now, Pay Later” solutions. The stock has a 37 P/E ratio and a $470 million market cap. It’s almost quadrupled year-to-date as more people create their accounts. Sezzle offers flexible financing where you can make four monthly payments without accruing any interest. You also won’t have to worry about any hard credit checks.
The small fintech company has been delivering exceptional financial performances. Revenue increased by 35.5% year-over-year (YOY) in Q1 2024 while net income soared by 364.3% year-over-year. Sezzle closed out the quarter with a 17.0% net profit margin.
The financial results prompted Sezzle to set ambitious guidance. Guidance for fiscal 2024 GAAP net income went from $20.0 million to $30.0 million. A 50% jump in a single quarter demonstrates strong momentum. Sezzle also raised its revenue guidance and now projects 25% YOY growth instead of 20% YOY revenue growth.
E.l.f. Beauty (ELF)
E.l.f. Beauty (NYSE:ELF) has been comfortably outpacing the stock market for several years. Shares are up 51% year-to-date and have gained more than 1,500% over the past five years. The company has impressed investors with high revenue growth.
The cosmetics firm reported 71% YOY revenue growth in Q4 FY24. Leadership cited retailer and e-commerce channels as two growth catalysts. Those initiatives helped e.l.f. Beauty gain market share for the 5th consecutive year and also marked the 21st consecutive quarter of net sales and market share growth. The company also generated $14.5 million in GAAP net income and had a profit margin just shy of 5% for the quarter.
E.l.f. Beauty is winning over younger generations and has plenty of runway for additional growth. Leadership suggested that growth will remain elevated in fiscal 2025. As other beauty firms report slower revenue growth, e.l.f. stands to gobble up market share and reward long-term investors.
SoFi (SOFI)
SoFi (NASDAQ:SOFI) is a fintech firm that offers bank accounts, loans, investment portfolios, credit cards and other resources to strengthen your finances. Shares have had a rough stretch, dropping by 34% year-to-date. However, the company isn’t likely to stay down for long.
The firm has been reporting profitable quarters, including $88 million in GAAP net income in Q1 2024. That’s a significant turnaround from a $34.4 million GAAP net loss in the same quarter last year. SoFi also posted $645 million in revenue, a 37% YOY improvement.
Memberships continued to grow steadily and reached 8.1 million. That’s a 44% improvement compared to the same quarter last year. The lending segment contributed to roughly half of the company’s GAAP net revenue. This segment’s revenue dropped by 2% YOY. Any pickup in the lending segment can result in meaningful gains, and SoFi is demonstrating it can diversify beyond this segment.
SoFi may continue to stay flat for months, but once it gains momentum, it can take off quickly.
On this date of publication, Marc Guberti held long positions in SEZL, ELF, and SOFI. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.