In general usage, a "sleeper" is a car that is faster than it looks, particularly in a straight line. Growing up I usually heard the term in connection street stock drag cars from the 60s and early 70s. Many of those cars were the pedestrian version of muscle cars with all the muscle car go fast bits, but none of the visual cues.
An E30 M3's "speedy" visual cues are subtle, but still there. I wouldn't call it a sleeper, but I wouldn't consider it "wrong" for someone else, particularly a non-car person, to call it a sleeper.
If you put an S50 in an E30 325e shell, that would be a sleeper.
