Video games have become the largest entertainment industry, with an estimated annual value of around $200 billion. Gaming has always been a promising area to check for under-the-radar growth stocks, since it's an industry that is not widely understood on Wall Street. One of the reasons is that video game companies don't provide year-to-year revenue growth like typical growth stocks, but they still can deliver market-beating returns. 

The outlook for more growth in the industry over the next decade looks very favorable. Various technological trends, such as cloud gaming, faster mobile connection speeds, and ongoing advancement in graphics technology, are making games more accessible and better-looking, and that is a perfect recipe for more players and more revenue growth.

While investors can't go wrong investing in the top game companies, two promising ideas that could deliver great returns are gaming peripherals brand Corsair Gaming (CRSR -0.64%) and under-followed game producer Ubisoft Entertainment (UBSFF 7.13%) (UBSFY -1.40%).

1. Corsair Gaming

People don't have to invest in the actual companies that make video games to earn good returns. Another option is to invest in the companies that enable millions to play games, such as one of the leading makers of gaming peripherals, Corsair Gaming.

In addition to making premium keyboards, headsets, and mice that are designed for gaming, Corsair also provides components and systems for building customized gaming PCs. Total revenue across the business grew 12% in 2021 to reach $1.9 billion, and this was during a challenging environment of component shortages and price increases that pressured sales.

Management sees a more favorable demand environment opening in the second half of 2022 and into 2023 as prices for computer components, such as graphics processors, start to decline, allowing gamers to more affordably upgrade their PCs with Corsair's products. To be clear, Corsair doesn't make graphics processors, or graphics cards as they are sometimes called. It makes computer cases, power supplies, and other hardware components that people tend to buy when they upgrade their graphics card.

Over the long term, more players are expected to not only play games, but also stream their gameplay on social gaming platforms like Amazon's Twitch. This will drive growing demand for Corsair's streaming products, such as lighting and cameras, which have already emerged as the company's fastest-growing category of sales. 

Over the long term, management estimates that the peripheral market will grow between 20% to 25% per year. At a cheap price-to-earnings ratio of 10 times this year's earnings estimate, the stock is too cheap, as the market is basically saying the company will never grow again at that valuation. But the long-term tailwinds in the industry are real and will almost certainly push the company's revenue, profits, and stock price higher over the next decade.

2. Ubisoft Entertainment

Ubisoft doesn't get as much attention among U.S. investors as top game makers like Activision Blizzard and Electronic Arts, but Ubisoft is one of the top producers of video games in the world. In fiscal 2022 ending in March, the France-based company generated $2.3 billion in revenue and had 141 million players across all its games. Some of its notable titles that are best-sellers in the industry are Assassin's Creed, Far Cry, and Rainbow Six.

Ubisoft has a differentiated game lineup that stands out from its competitors. Instead of designing games that follow traditional formulas of standard gaming genres, such as first-person shooters and action-adventure games, Ubisoft's top games follow a different approach in game design. For example, Rainbow Six competes with the industry's top seller, Call of Duty from Activision. However, instead of copying its competitors' casual style of gameplay, Rainbow Six is a tactical shooter that is aimed at the esports crowd. 

Ubisoft also takes a different approach to how it monetizes games. The company follows its "golden rule," which is to let players enjoy the full game without requiring they spend more to unlock additional levels or features while playing the game. 

The approach has worked. Ubisoft has grown bookings (a non-GAAP measure of revenue) by 22% annually over the last five years. It's positioned to deliver more growth, with the console market expected to grow 10% to $81 billion in 2022, according to Deloitte Insights. This is good for Ubisoft, since most of its revenue comes from sales of console games, with the balance from PC and mobile platforms. 

Ubisoft is investing to continue growing its audience reach, but its stock is much cheaper on a price-to-sales basis than its U.S.-based competitors. Activision Blizzard, which is in the process of being acquired by Microsoft for $68.7 billion, trades at 7 times sales, while Electronic Arts trades at 5.3 times sales. Investors can buy shares of Ubisoft for a cheap sales multiple of just 2.3.

In Ubisoft, investors are getting a bargain for one of the world's premier game developers.