What Are Sleeper Stocks, and How Can You Spot Them?

In the fast-evolving world of stock markets, certain companies can often fly under the radar, quietly building strong fundamentals, while their share prices remain relatively unnoticed. These are what traders call "sleeper stocks." They are often undervalued or overlooked by the broader market, yet have the potential to deliver impressive returns over time. As we step into 2025. many of these sleeper stocks are ready to shine. This article explores some of the top sleeper stocks that could surprise traders with substantial growth potential.

What Are Sleeper Stocks?

Before diving into specific stocks, it's important to understand what sleeper stocks are. These are companies that are not widely recognised by the broader market but hold substantial growth potential due to strong business fundamentals, emerging technologies, or market positioning. Often, these companies are in the early stages of growth, facing minimal competition, or working in niche sectors that haven't yet gained mainstream attention. The key to identifying sleeper stocks is recognising the subtle signs of future growth before the wider market catches on.

Why Should Traders Pay Attention to Sleeper Stocks?

Investing in sleeper stocks can offer several advantages:

High Upside Potential: While sleeper stocks may not deliver immediate results, their long-term growth potential can be significant.

Undervalued Opportunities: Many sleeper stocks are undervalued by the market, which provides an opportunity to buy them at a discount before their true value is realised.

Diversification: Adding sleeper stocks to your portfolio can help diversify your holdings, reducing risk by including companies from emerging sectors or underappreciated niches.

Top Sleeper Stocks to Watch in 2025

Danaher Corporation (DHR)

Danaher is a healthcare giant that's been flying somewhat under the radar. While its exposure to biologics and biopharma has kept it on the edge of growth for years, the re-acceleration of these sectors positions Danaher to outperform. The company's diagnostics business continues to steal market share, and with its low valuation relative to its growth potential, Danaher looks set to benefit from healthcare's ongoing evolution. For those on the lookout for an undervalued player in a strong sector, Danaher might be a hidden gem.

Praemium (PPS)

While many might not be aware of Praemium, this Australian investment platform is quietly becoming a key player in the wealth management space. Focused on high-net-worth advisors, it's expanding its offerings with new services like Spectrum, and it's already secured a major client in Euroz, shifting $2 billion in funds to the platform. Despite its recent success, Praemium is still undervalued compared to its competitors, making it a solid sleeper stock for those looking to invest in the growing trend of wealth tech.

Whirlpool Corporation (WHR)

Whirlpool might not be on everyone's radar these days, especially after a dip in earnings post-2021. but the company is making a strategic shift towards high-margin small appliances, like blenders and espresso machines. As the housing market recovers and interest rates stabilise, Whirlpool could see a resurgence. Its low P/E ratio of 9 and a dividend yield of 6.8% make it a compelling pick for investors looking for a dividend stock with the potential for long-term growth—an often-overlooked opportunity in the appliance sector.

Supply Networks (SNL)

Supply Networks might not be a household name, but it's a standout performer in the automotive aftermarket industry, particularly in the truck parts sector. The company's profits have been steadily climbing, with its NPAT tripling in the past four years. Thanks to strong shareholder-aligned management and an impressive return on capital, Supply Networks is set up for continued success. If you're on the hunt for a stock with excellent growth potential in a niche industry, this under-the-radar player might just be your next great investment.

Constellation Energy

As the energy transition continues to take centre stage, Constellation Energy is quietly positioning itself as a renewable energy powerhouse. The company's restructuring efforts to boost profitability have placed it in a strong financial position, and its focus on clean energy gives it solid growth potential in the green energy sector. While it may not yet be at the forefront of investors' minds, Constellation's commitment to renewable energy could make it a valuable sleeper stock in the long run.

Zeta Global Holdings (ZETA)

Zeta Global, a company leveraging AI to predict consumer behaviour, is a sleeper stock that's making quiet but impactful moves in the marketing tech space. With its recent acquisition of LiveIntent, a major player in email monetisation, Zeta has strengthened its position and is well-placed for growth. The company's expanding footprint in AI-driven consumer insights makes it an exciting growth stock for those looking to invest in the future of marketing technology, all while flying under the radar of many mainstream investors.

Adobe (ADBE)

Though Adobe is widely known, it's often underestimated as a sleeper stock. The company is not just the leader in creative software; it's also positioning itself as a major player in AI, with innovations in tools that leverage AI for design and productivity. Adobe's strong profitability and impressive growth trajectory make it an attractive long-term hold. As the digital economy continues to grow, Adobe's ability to integrate AI into its software suite puts it in a prime position for further expansion, making it a sleeper stock with huge upside potential.

Home Depot (HD)

Home Depot may not fit the typical sleeper stock profile, but its strong performance and adaptability make it an underrated choice. The company continues to thrive in the home improvement sector, especially with a recovering housing market and increasing demand for DIY and professional projects. Its dominance in the market, combined with an ability to adapt to shifting consumer behaviours, positions it well for future growth. If you're looking for a stable yet growing stock, Home Depot is a sleeper in plain sight.

How to Identify Sleeper Stocks

While it's helpful to look at some top sleeper stocks, identifying them on your own requires a bit of strategy and research. Here are some tips for spotting potential sleeper stocks:

Look for undervaluation: Stocks that are undervalued relative to their potential growth can often be sleeper stocks. Look for companies with strong earnings potential that haven't yet caught the market's attention.

Focus on emerging industries: Sectors such as renewable energy, artificial intelligence, and biotechnology often hide potential sleeper stocks, especially companies that are at the early stages of market penetration.

Track company fundamentals: A company with a solid balance sheet, consistent earnings growth, and a compelling growth strategy may be a good candidate for a sleeper stock.

Watch for market trends: Pay attention to industries or niches that are gaining momentum but haven't yet seen widespread adoption. These are often breeding grounds for sleeper stocks.

Final Thoughts

2025 presents a wealth of opportunities for traders looking to capitalise on sleeper stocks. Whether it's in the renewable energy sector, the AI revolution, or emerging biotechnology treatments, these companies are poised for growth. While investing in sleeper stocks comes with its risks, identifying those with solid fundamentals and growth potential could yield significant returns over time.

As with any investment, it's essential to do your research and consider diversifying your portfolio. The key is to stay informed and be patient, as sleeper stocks often require time to fully realise their potential. Keep these top sleeper stocks in mind as you plan your investment strategy for the year ahead.

Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.