2 Phenomenal Stocks You've Never Heard Of

By Daniel Miller Markets Fool.com

Growth stocks aren't for the faint of heart, as the young companies that fit that description are often high-risk, high-reward. Investors willing to accept the uncertainty could be handsomely rewarded.

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But growth companies aren't always easy to find; many fly under the radar for years. Here are two that you've likely never heard of whosestocks could turn into big winners in the years ahead: Control4 Corp. (NASDAQ: CTRL), Duluth Holdings Inc. (NASDAQ: DLTH).

A lucrative smart-home stock

We live in a world that is becoming increasingly connected. Our phones now connect to our cars, computers, televisions and our homes. We can open our garage doors or unlock the front door using a smartphone app, or check in on security cameras remotely. One company that's poised to benefit from this growing trend is Control4.

Control4 is a leading provider of personalized automation and smart home solutions that enable you to control just about every connected device in your home. It was founded in 2003 and went public in 2013. However, its stock price has surged nearly 50% since the calendar flipped over to 2017. One attractive factor for potential investors is that Control4 has secured a niche in the premium end of this market, as you can see below.

Image source: Control4's March 7, 2017 investor presentation.

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Not only has Control4 positioned itself in the high-dollar section of the smart-home automation market, here's a statistic that emphasizes just how lucrative its future could be. It estimates its U.S. penetration to be a meager 1.4% -- and let's be honest, the market currently is a fraction of what it could be in two decades -- and its target market of households with more than $150,000 annual income has more than 14.1 million homes for Control4 to crack.

Here are a few financial factors to consider. First, Control4 ended the fourth quarter with $62 million cash, net of debt, which is encouraging for such a young company. Second, it posted record revenue at the high-end of guidance with total Q4 year-over-year revenue growth reaching 34%. Third, it posted incredible gains in margins: Its operating margin jumped 869 basis points to 15.3% and a 969 basis point improvement in net margin to 13.5%.

Our lives and homes will continue to grow increasingly more connected with our electronic devices, and Control4 has found a lucrative market to do business in over the next two decades.

Buck naked guy

You might have seen Duluth's commercials, but you likely haven't heard anything about its stock. That's a travesty, as it's been one of the few successful retailers over the past couple of years. Duluth is a rapidly growing brand that offers high-quality, solution-based casual wear, workwear and accessories for men and women who lead a hands-on lifestyle. Here are a few reasons investors should remember Duluth when adding stocks to their watch lists.

Duluth has humorous and distinctive marketing that cuts through all the noise of retailer advertising and grabs attention, with quirky characters such as the Giant Angry Beaver, Buck Naked Guy and Grab-Happy Grizzly, to name a few you might recognize.

While its advertising is meant to appeals to something of niche market, its has developed a broader, loyal and more lucrative customer base than you might expect. According to an internal company survey, 88% of Duluth consumers work outside of the building trades, and the average consumer is a homeowner with annual household income greater than $75,000 -- these consumers can afford to pay for a higher-quality apparel product. Further, at the end of 2016 the company had over 275,000 online product reviews with over 90% checking in at four or five-star ratings.

One driver of Duluth's recent growth has been itssuccess in an arena where many brick-and-mortar retailers have struggled: omnichannel marketing. That essentially means successfully offering a seamless experience to the customer, whether they are shopping in store, online, using a mobile device, or through a catalog. Duluth sells its products exclusively through its direct and retail channels, which gives management complete control of presentation, pricing, and product presentation.

In terms of its growth story, Duluth has prioritized e-commerce first -- a strategy many older retailers have struggled with. Duluth's retail store sales generate only 18% of total net sales, which means there are plenty of large markets and low-hanging fruit for its growing brick-and-mortar presence. It only has 18 stores currently, but plans to open between 10 and 12 during 2017. So far, those retail outlets have thumped the traffic trend among traditional brick-and-mortar retailers; Duluth's stores generated 74% more customer visits in 2016 than in the prior year.

While neither Duluth nor Control4 are stocks that the average investor has heard of, both companies have found lucrative consumer bases, and if their managements can continue to execute on growth strategies, the best is yet to come for them.

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Daniel Miller has no position in any stocks mentioned. The Motley Fool recommends Duluth Holdings. The Motley Fool has a disclosure policy.