Investing in 2 Undervalued Companies at the Bottom of the Market to Catch Their Reversals

Owning stocks in high-growth companies is a proven way to create long-term wealth. In fact, there is recent research that shows how beneficial this can be for long-term profits.

A McKinsey study found that companies generate an additional three to four percentage points of shareholder value for every five percentage points of revenue growth per year. The study involved 5,000 public companies from 2005 to 2023.

It is ideal to buy growing companies when their stock prices are falling before the market recognizes the value behind their market opportunities. This is exactly the opportunity that investors have right now with the following companies.

1. Sentinel One (S)

SentinelOne (S) is one of the fastest growing cybersecurity firms. The company's annual revenue grew nearly 10 times between fiscal 2020 and 2023. The critical nature of this market makes it worth considering for any investor looking to increase their returns.

Stocks are trading far from their previous highs. Wall Street is concerned about slowing growth in the near term. The company increased revenue by 70% year-on-year in the most recent quarter, but guidance for the next quarter points to a slowdown in revenue growth.

Businesses are tightening their spending budgets in the face of economic uncertainty, but the market's focus on change in the industry offers good buying opportunities and long-term opportunities remain excellent.

SentinelOne's growth may slow this year, but it should continue to show strong growth for several years. Total cybersecurity spending in 2022 was estimated at $71 billion, up from $41 billion in 2019, according to Statista. They should continue to rise as companies grapple with the staggering losses that come with every successful cyberattack.

SentinelOne has very competitive technology to attract new customers. As generative artificial intelligence (AI) is increasingly being used to create new content, cybercriminals are exploiting vulnerabilities in these applications to attack organizations. The company has responded with its Purple AI technology, which uses generative AI to help security teams manage risk and learn about potential threats.

There are several top cybersecurity companies out there, but SentinelOne continues to grow faster than its competitors, which is saying a lot. Given the relatively low price-to-sales ratio, investors should consider buying shares before the market goes up.

2. Monday.com (MNDY)

Monday.com (MNDY ) is another high-growth stock that has reported strong gains but has struggled to grow in the near term.

Monday is a leading provider of work management software that has grown in demand as companies look for ways to improve employee productivity. Monday Work OS makes it easy to manage your workflow and troubleshoot. Explosive demand for the service has quintupled revenue in the last three years.

Like SentinelOne, Monday.com was an expensive and loss-making growth company that fell out of favor last year, but it opens up opportunities for patient investors. In fact, Wall Street is starting to feel the same way again, and stocks are up 47% since the start of the year. These gains are supported by continued growth, with Monday.com reporting a 50% year-on-year increase in revenue in the first quarter.

The deployment of new AI capabilities on the platform should support demand growth. These new features will make Work OS even more intuitive, which has been its main advantage over the competition. Management expects second-quarter revenue growth to slow as companies become more cautious about their budgets. But companies aren't about to stop looking for ways to speed up software development and improve efficiency.

While revenue growth is expected to slow from 36% to 37% in the second quarter, according to Grand View Research, Monday is serving a large and growing addressable market estimated at $47 billion in 2021. It can rise for a long time, and with the stock trading well below its highs, now could be the perfect time to buy, especially when the company is still quite small with only $162 million in quarterly revenue.