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Under-The-Radar Cloud Stock With Massive Upside Momentum

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Alight (ALIT - Free Report) released its first quarterly results as a public company, and it did not disappoint. Despite only growing its topline by 4% this past quarter, its operating income increased 211%, its cloud-based booking explode by 287%, and management raised full-year guidance. ALIT is up over 6% in today's post-earnings price action, having already rallied 22% in the past two weeks of trading. This stock still has a lot more room to run at this heavily discounted price as a slew of analysts initiate coverage of this newly public equity.

Alight's leading AI-driven digital human capital business is transitioning from an on-premise platform to a cloud-based business process as a service (BPaaS) enterprise. This transition has hindered some of the business's short-term revenue growth. Still, it is positioning the business to control this enterprise cloud niche, with over 70% of Fortune 100 companies already utilizing its services.

Its cloud-based (aka BPaaS) revenue increased by 19.0% to $94 million, now making up 14.0% of total sales. Alight anticipates its BPaaS operations to be a quarter of its topline by 2023, with 50%+ being its long-term target. The transition to the cloud has already improved its cost structure, with operating margins having tripled in the past year. Alight is well on its way towards a profitable growth narrative.

ALIT is trading at below 2x forward price to sales (P/S) compared to its less capable, lower growth, competitors ADP (ADP - Free Report) and Paychex's (PAYX - Free Report) who are rocking P/S's of 5.7x & 9.5x, respectively. ALIT is on sale. The rumors of Voya Financial (VOYA - Free Report) exploring a potential acquisition make perfect sense at these valuations. They would purchase the company for the same reason we would. It's a steal.

I expect to see a wave of analysts come out with bullish price targets over the next week or so, which should further boost these shares. I'm currently looking at a price target of $20 a share, an 80% upside from today's post-earnings price.