These under-the-radar stocks can give a much-needed boost to an investor's portfolio, analysts say

Published Sat, Feb 19 20227:29 AM EST

There's a bunch of stocks that are just not getting enough attention from investors, Wall Street analysts said this week. These overlooked companies have tremendous growth potential, and shareholders should take advantage of the buying opportunities, analyst said. CNBC Pro combed through the top Wall Street research to find some of the best under-the-radar stock ideas. They include GlobalFoundries, Graco , Wex , Carpenter Technology and Perella Weinberg . Graco Shares of the industrial manufacturer are down more than 11% this year, but RBC analyst Deane Dray says investors should buy the dip. "Graco is among the higher-quality industrials with the sector's second highest EBIT margins/organic growth and sector-best ~25% ROI," he said recently. The firm also said Graco should continue to be a work-from-home beneficiary. RBC added that it's bullish on its management team. "Additionally, the company is an under-the-radar high quality of earnings compounder positioned to benefit from WFH/Work-on-Home in its Contractor segment, despite tough comps, and the continued cyclical recovery in its Industrial and Process segments," he wrote. The company also reported solid-fourth quarter earnings on Jan. 31, and Dray is particularly intrigued by its balance sheet optionality. "Graco also has a 'high-quality problem of net-cash on its balance sheet, but is patiently waiting for M & A markets to normalize," the firm said. Finally, the stock continues to be relatively inexpensive relative to peers, according to the firm. WEX The payment processing company seems to be firing on all cylinders. Wex shares are up more than 16% this year, and investment firm Cowen said that the stock has more room to run. "We remain constructive on WEX and see upside through a combination of positive estimate revisions and further modest multiple expansion," analyst George Mihalos wrote in a note to clients. The analyst also said Wex is a key beneficiary of rising inflation, increasing fuel prices and a still developing travel recovery that isn't priced in yet. Mihalos went on to predict long-term double-digit revenue growth and called the stock's valuation "undemanding." "In our view, WEX remains 'under the radar' of most investors, despite one of the most compelling risk/reward profiles in the mid-cap payments space, " he said. Perella Weinberg The financial services company is "building momentum after [a] record 2021," JMP analyst Devin Ryan. The firm cited a number of factors for its bullish thesis, adding that it sees big earnings upside in the coming quarters. Those factors include margin expansion, elevated capital expansion and a record fee backlog. JMP noted that the advisory business is one of the most compelling investment areas within the financial services sector for shareholders. "'Advisory Services' is a great long-term growth business given its non-commoditized nature, an expanding fee pool over time with inherent growth drivers, and an ongoing continued shift to independent advice," he said. Shares of the company — which went public through a SPAC last year — are down more than 13% in 2022. Ryan, who has a Street high price target on $19 per share, acknowledged that the stock could be volatile given its short trading history. However, he urged investors to stick with the stock. "While we think that PWP is more under the radar than its other advisory peers given a shorter public history, we have followed similar situations from peers that have moved into the public markets over the past decade and we believe those periods have represented attractive opportunities for new shareholders," he wrote. GlobalFoundries- Bank of America, Buy rating "Under the radar, top 5 reasons to Buy. We reit. Buy and $90 PO on GFS and believe recent stock pullback presents a particularly attractive buying opportunity. In our view, GFS is solidly positioned to benefit from secular (autonomous/electric vehicles, IoT, RF, image sensors, mobile wallet,), cyclical (capacity shortages particularly on lagging edge), and geopolitical trends while simultaneously driving significant model leverage, which should result in long-term EPS Power of $4.50, a > 100% CAGR from annualized 3Q21 EPS." Graco- RBC, Outperform rating "Overall, we believe risk/reward looks balanced here. ... Graco is among the higher-quality industrials with the sector's second highest EBIT margins/organic growth & sector-best ~25% ROIC. ... The company is an under-the-radar high quality of earnings compounder positioned to benefit from WFH/Work-on-Home in its Contractor segment, despite tough comps, & the continued cyclical recovery in its Industrial & Process segments. Graco also has a "high-quality" problem of net-cash on its balance sheet, but is patiently waiting for M & A markets to normalize. WEX- Cowen, Outperform rating "We remain constructive on WEX and see upside through a combination of positive estimate revisions and further modest multiple expansion. We reiterate our Outperform rating, as we believe the company is well positioned to weather a more inflationary environment at an undemanding valuation. ... achievable. In our view, WEX remains "under the radar" of most investors, despite one of the most compelling risk/reward profiles in the mid-cap payments space." Perella Weinberg Partners- JMP, Market outperform rating "Perella Weinberg is entering 2022 with building momentum after record 2021. ... Advisory Services is a great long-term growth business given its non-commoditized nature an expanding fee pool over time with inherent growth drivers, & an ongoing continued shift to independent advice. ... While we think that PWP is more under the radar than its other advisory peers given a shorter public history, we have followed similar situations from peers that have moved into the public markets over the past decade & we believe those periods have represented attractive opportunities for new shareholders Carpenter Technology- JPMorgan, Overweight rating "Flying Under the Radar. ... .Since the beginning of 2020, Carpenter has been the second worst performing stock in the XME. With growing signs of an inflection point in the company's key end market, aerospace, we believe that is likely to change in the coming months and upgrade the stock to Overweight from Neutral, raising our Dec-22 price target to $53. ... We believe the company's core aerospace markets are in the process of inflecting, which should drive rapid margin progression and earnings growth."

Melissa Smith, CEO, WEX

Scott Mlyn | CNBC

There's a bunch of stocks that are just not getting enough attention from investors, Wall Street analysts said this week.