3 Little-Known Stocks That Could Provide Monster Returns


Finding obscure stocks with strong businesses can be a great investment strategy.

Finding stocks that are a bit ignored by the market but are fantastic companies is a great investment strategy. These stocks can potentially have serious upside when the masses discover them. While no stock is really “unknown” today, with all the research available to individual and institutional investors, there is a certain level of popularity in the stock market.

If you’re looking to buy obscure stocks, consider these three. They have great businesses and strong upside.

1. UiPath

UiPath (PATH -2.65%) is a leader in robotic process automation (RPA). RPA is software that automates repetitive tasks, freeing employees to do work that requires original thinking. The work that can be automated is limited by the inputs available, so UiPath also has artificial intelligence (AI) tools that increase the amount of information that can be pulled from them. Combined, these two technologies create a powerful option for clients.

The company also has a great financial profile, posting annual recurring revenue (ARR) growth of 22% to $1.46 billion in the fourth quarter of fiscal year 2024 (ending Jan. 31). It also recorded its first quarter with a positive generally accepted accounting principles (GAAP) operating margin, a sign to investors that management is serious about profitability. With management predicting around 19% ARR growth in FY 2025, it still has much room to expand.

UiPath also doesn’t command a premium price tag. At 8.5 times sales, it’s far cheaper than many of its software peers despite growing at around the same pace.

PATH PS Ratio Chart

PATH PS Ratio data by YCharts. PS = price to sales.

UiPath is a great investment because it’s in a growing field, has strong financials, and can be bought for a fairly cheap price. As a result, investors can pile into this stock and reap the benefits as it steadily increases in value through growth.

2. dLocal

dLocal (DLO -2.50%) is another obscure company that is a vital partner to many of the largest companies in the world. With clients like Shopify, Spotify, Amazon, and Nike, dLocal gives the business some credibility.

All these clients desire to expand worldwide. Still, the financial systems of some emerging market economies (like India, Egypt, and Thailand, for example) aren’t the same as more developed countries. As a result, each company would have to build a payment processing infrastructure suited to each country. This is expensive and time-consuming, and the work may not provide a positive payback.

dLocal’s product takes care of all of that for them. Its software plugs into its client’s existing payment processing network, allowing them to process transactions in these locations. By doing the legwork for its clients, dLocal brings commerce to countries that would otherwise be ignored.

This service has become incredibly popular and is growing rapidly. In Q1, revenue grew at a 34% pace on the back of 49% payment volume growth. It’s also profitable, posting a profit margin of 9% in Q1.

dLocal is a relatively unknown company, but investors should take notice and get into the stock before the rest of the market notices.

3. Procore

Procore (PCOR -2.08%) is used by many firms in the construction industry. Its products give clients a single reliable database, which allows contractors, subcontractors, and project owners to accurately assess the project’s status. Additionally, working from one reliable database reduces costly rework, which can push projects late and over budget.

Procore is also a great way to take advantage of the software transformation that happened a decade ago in business. Because job sites didn’t have access to the internet, software solutions were relatively worthless in the field. However, 5G has changed that notion, and Procore is a way to turn back the clock and invest in a growing software company.

In Q1, Procore’s revenue rose 26% year over year to $269 million. Management also raised its revenue 2024 outlook in the quarter. As for profitability, Procore is inching toward achieving that goal, although it hasn’t broken even yet.

PCOR Operating Margin (Quarterly) Chart

PCOR Operating Margin (Quarterly) data by YCharts.

Recently at 9.7 times sales, Procore is a great business to invest in without fearing of overpaying for the stock. I think Procore will be a market-beating stock over the next five to 10 years, and investors can pick up the stock now to take advantage of this potential.

Keithen Drury has positions in DLocal, Procore Technologies, and UiPath. The Motley Fool has positions in and recommends Procore Technologies and UiPath. The Motley Fool has a disclosure policy.



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