Summary:
In the summer of 2025, the tech sector is thriving, with the S&P 500 and Nasdaq-100 hitting new highs. Despite this, some undervalued tech stocks remain overlooked, presenting unique opportunities for investors. Companies like Nice Systems, Alarm.com, and GoDaddy offer cloud-based, mission-critical solutions with strong revenue growth and modest valuations, making them attractive long-term investments.
What This Means for You:
- Consider diversifying your portfolio with undervalued tech stocks that have strong growth potential.
- Focus on companies with recurring revenue models, such as cloud-based subscriptions, for stable returns.
- Evaluate valuation metrics like price-to-free cash flow and price-to-sales ratios to identify hidden bargains.
- Be patient; undervalued stocks may take time to reflect their true value but can yield significant long-term gains.
Original Post:
Wondering where to find value in a red-hot tech sector? Check out these overlooked tech gems while they’re still cheap.
The stock market is thriving in the summer of 2025. Despite an uncertain economy, the leading stock indexes are setting new highs on a regular basis. The S&P 500 (SNPINDEX: ^GSPC) index has gained 19% in the last quarter, while the more volatile Nasdaq-100 rose 26%.
But there are still some great values hiding in plain sight, even in the tech sector. Some incredible growth stocks never got the memo about soaring in 2025. When the modest stock charts combine with great long-term business prospects and modest valuations, it’s time to take a second look at these undervalued growth stocks.
Let me introduce you to Nice Systems (NICE -0.67%), Alarm.com (ALRM -0.34%), and GoDaddy (GDDY 0.26%). These three innovative tech stocks are some of the fastest-growing companies you can buy at a reasonable price today.
What these tech stocks have in common (besides being a bargain)
These stocks have a few things in common:
- They have cloud-based business models, selling software and services with long-term contracts or monthly subscription plans.
- Client lists are primarily in the business world, ranging from GoDaddy’s 20 million small businesses to NICE’s nearly exclusive focus on enterprise-scale clients.
- Many of their products are mission-critical tools for data security or physical safety monitoring. Once your company signs a deal with one of these companies, you’re pretty likely to stay committed for the long haul.
- Their lucrative business models have driven strong revenue growth and robust free cash flows in the last three years:
NICE Revenue (TTM) data by YCharts. TTM = trailing 12 months.
…and here are the bargains
With business descriptions and financial results of this caliber, you probably expect Nice, Alarm.com, and GoDaddy shares to trade at sky-high valuation ratios. But all three stocks are down year to date and don’t look expensive at all. In a world where the “Magnificent Seven” stocks trade for more than 50 times free cash flow and double-digit price-to-sales ratios, this trio is a breath of affordable air:
Price to Free Cash Flow (TTM) | Price to Sales (TTM) | ||
|---|---|---|---|
GoDaddy | 17.5 | 5.2 | $24.0 billion |
Nice | 11.6 | 3.5 | $9.7 billion |
Alarm.com | 16.4 | 2.9 | $2.8 billion |
Data collected from Finviz.com on 7/18/2025. TTM = trailing 12 months.
Why I’m excited about these tech stocks right now
So, I’m talking about three high-octane growth stocks trading at modest valuation ratios. All of them target very large global markets, yielding excellent business results.
These stocks could double or triple in value and still appear inexpensive compared to the Magnificent Seven club. I’m not saying that any of them will make that kind of jump anytime soon, as it often takes some time before market makers catch up on the brilliant results of a fast-growing software stock. But investing is more of a marathon than a sprint, so I don’t mind waiting around for a solid long-term return.
As a tech nerd with a long-standing history of cloud-based side gigs, I’ve used GoDaddy’s security and data management services for years. I don’t have a personal connection to Nice or Alarm.com, but both are award-winning providers of leading-edge services. I would probably be a happy customer if I ran a large business with a significant need for call center and security monitoring services.
Image source: Getty Images.
That’s the secret sauce for building shareholder value over the long haul — build great solutions, and the financial results will come. One of these days, the stocks should follow suit.
Until then, you should consider grabbing a few shares of Alarm.com, GoDaddy, and/or Nice Systems. These tech stocks are downright cheap in July 2025.
Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nice. The Motley Fool recommends Alarm.com and GoDaddy. The Motley Fool has a disclosure policy.
Extra Information:
Understanding Value Stocks – Learn more about identifying undervalued stocks in the tech sector.
YCharts Financial Data – Explore detailed financial metrics for companies like Nice Systems and Alarm.com.
Free Cash Flow Explained – Understand why free cash flow is a critical metric for evaluating undervalued stocks.
People Also Ask About:
- What are undervalued tech stocks? – Undervalued tech stocks are companies with strong growth potential trading below their intrinsic value.
- How do I identify undervalued stocks? – Look at metrics like price-to-free cash flow and price-to-sales ratios.
- Why are cloud-based companies a good investment? – They often have recurring revenue models, providing stable cash flow.
- What is the difference between S&P 500 and Nasdaq? – The S&P 500 includes a broad range of sectors, while Nasdaq focuses heavily on tech companies.
- Is GoDaddy a good investment in 2025? – With its strong revenue growth and modest valuation, GoDaddy presents a compelling opportunity.
Expert Opinion:
Investing in undervalued tech stocks like Nice Systems, Alarm.com, and GoDaddy offers a unique opportunity to capitalize on growth potential at a reasonable price. As cloud-based solutions continue to dominate the tech landscape, these companies are well-positioned to outperform in the long term, making them a strategic addition to any diversified portfolio.
Key Terms:
- Undervalued tech stocks
- Cloud-based business models
- Price-to-free cash flow
- Recurring revenue companies
- Mission-critical software solutions
- Tech sector investments
- Long-term growth potential
ORIGINAL SOURCE:
Source link
