Investors have just recovered from the shock of the software sell-off from earlier this month and are now weighing their options in a world where Artificial Intelligence is quite clearly going to disrupt many industries. On February 10, UBS also issued a warning about the Information Technology sector, advising investors to diversify away from it.
The importance of this diversification was also stressed by Edison Byzyka, Chief Investment Officer at Credent Wealth Management. While talking to Schwab Network, the CIO stressed that other sectors offered opportunities worth exploring:
”Playing the long-term valuation game, we know that in the current large-cap space, companies are sitting on a 23x-24x forward earnings multiple, which implies pretty weak large cap returns over the next 5 years… stepping into that smaller space for those companies that have those expectations that are looking healthier, for us those reside in the consumer discretionary sector, the industrials, and the financial sector.”
As software earnings are set to take a hit, investors are seeking more stock ideas, especially those that will survive the AI disruption. One way to identify companies that could weather this storm is to look at those expected to grow revenue over the long term while sustaining short-term earnings growth. To dig out these stocks, we decided to come up with a list of 10 undervalued growth stocks for the next 5 years.
Our Methodology
To compile the list of 10 undervalued growth stocks for the next 5 years, we looked at companies with a market cap of at least $2 billion and a forward PE of less than 15. We then filtered out companies with positive earnings growth in 2026 and expected revenue growth over 15% for the next 5 years. We then selected 10 stocks with the best upside potential, as assessed by Wall Street analysts, and ranked them accordingly. The number of hedge funds that hold the stock as of Q3 2025 is also included in our list.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
Note: All the share price data in the article is as per market close on February 10.
10. DoubleVerify Holdings, Inc. (NYSE:DV)
Potential Upside: 5.8%
Number of Hedge Fund Holders: 40
As of February 10, analyst opinions on DoubleVerify Holdings Inc. (NYSE:DV) are divided: around 52% of analysts covering the stock assign a Buy rating, 43% a Hold rating, and 5% a Sell rating. Despite these mixed views, the consensus 1-year median price target of $14.0 still implies a nearly 46% upside.
Among the latest updates, Matthew Cost, an analyst at Morgan Stanley, increased the firm’s price target on DoubleVerify Holdings, Inc. (NYSE:DV) from $15 to $15.50 while keeping a Hold rating on January 13. The firm’s adjusted price target implies a further 57% upside from the current levels.
The analyst, in a research note to investors focused on the North American internet sector, said the setup for 2026 is expected to closely resemble that of 2025. The firm anticipates that the market will favor companies that demonstrate sustained, meaningful returns on invested capital, driven by GenAI or GPU-enabled technologies. However, sub-sectors facing greater disruption risk, including ridesharing from autonomous vehicles, as well as parts of e-commerce, travel, and smaller or less established advertising platforms, are expected to remain under pressure and trade at lower valuation multiples due to ongoing uncertainty.
In contrast to Morgan Stanley, Barclays downgraded DoubleVerify Holdings, Inc. (NYSE:DV) from Buy to Hold on January 12, while maintaining its $12 price target. The adjustment was made as part of the firm’s broader 2026 outlook for the software sector. The firm said that it remains positive on the broader software space heading into 2026. Barclays cited consistent IT spending trends, stable macroeconomic conditions, and valuation multiples that remain relatively low as the sector has fallen out of favor. This development, however, occurred before the software stocks selloff driven by AI developments.
DoubleVerify Holdings, Inc. (NYSE:DV) is a provider of media effectiveness platforms in the United States and internationally. The company offers DV Authentic Ad, DV Authentic Attention, Scibids AI, DV Pinnacle, Custom Contextual solution, and DV Publisher suite. It was incorporated in 2008 and is based in New York, New York.
9. Stewart Information Services Corporation (NYSE:STC)
Potential Upside: 14.06%
Number of Hedge Fund Holders: 11
On February 5, Stewart Information Services Corporation (NYSE:STC) reported strong financial results for the fourth quarter. The company posted revenue of $790.6 million for the quarter, beating consensus estimates of $774.95 million. Its Title segment drove much of the growth, with operating revenues rising 19%, supported by gains across both direct and agency title operations. This contributed to a 28% increase in title pretax income.
Domestic commercial revenues jumped 38%, led by growth in data centers and energy. The average fee per domestic commercial file surged 39% to roughly $27,000, compared to about $20,000 in the previous year. Agency operations also remained strong, generating $334 million in gross revenue, a 20% increase from last year. The company ended the quarter with approximately $480 million in total cash and investments, above statutory premium reserve requirements.
CEO Frederick Eppinger commented on the outlook by saying:
”For the full year ’26, we fully expect to improve margins and deliver in the low teen range for this segment, and expect that our recent acquisition of MCS will help us improve our historical margin outlook.”
Earlier, on February 2, Citizens JMP initiated coverage of Stewart Information Services Corporation (NYSE:STC) with a Buy rating and a $80 price target. The firm’s price target suggests a further 11.98% upside from the current levels.
Analysts Matthew Carletti, Karol Chmiel, and David Samar said:
”With a refreshed and driven management team and an oligopolistic marketplace for title insurance, we believe Stewart has taken the necessary actions to drive strong growth and expand margins for the foreseeable future, even without the help of an improved housing market backdrop.”
Stewart Information Services Corporation (NYSE:STC) provides title insurance and real estate transaction-related services across the United States and internationally. It is engaged in examining, searching, closing, and insuring the title to real property.
