7 Growth Stocks on Sale

What's your investment style? Sooner or later, all investors must answer this loaded question. Are you a Rule Maker or a Rule Breaker? A grow-getter or a value-seeker? A small-f foolish speculator or a Foolish investor?

Although it's always good to clarify our general tolerance for risk-taking, we should never forget two important things:

1. Growth and value investing are just joined at the hip, and
2. The most awesome growth stocks are also undervalued stocks.

The best of both worlds
Successful investing isn't simply about buying stocks with the lowest P/E ratios, or ones with the most spectacular growth rates. After all, treacherous value traps and growth traps lurk around every corner of the market. Instead, the key to investing is to put your money on the most attractive risk/reward propositions that Mr. Market has to offer.

Buying growing companies at discounted prices is probably the best way to do that. This approach earns you the double benefit of buying a stock that trades below its fair value today, and owning a business that's well-positioned to grow that value tomorrow.

We've got these stocks PEG-ed
So, with our hearts set on growth -- but our brains stubbornly fixated on getting a fair price for it -- here are seven more reasonably priced, fast growing favorites of our Motley Fool CAPS community.

In addition to having five-year estimated growth rates of at least 20%, and PEG ratios below one, these stocks have received a four- or five-star rating from our pool of more than 30,000 individual and professional investors.

As always, don't take these stocks as well-formulated investment recommendations, but rather as candidates for further research. Regardless of which investment approach you take, due diligence is the thread that binds all superior returns.  

To get you started, here's a brief summary of one stock that caught my attention.

Government gainer
Although our Virginia-based headquarters is just a stone's throw from the nation's capital, we Fools usually stay away from stocks levered too highly to the government's fickle spending habits. So when I noticed Harris, a company that derives two-thirds of its business from the U.S. government, on our list of five-star stocks, I thought I'd take a closer look.

Though I'm still spooked by Harris' concentrated exposure to such a manic client, our CAPS community brings up several bullish points to consider.

Most obviously, all of Harris' communications equipment segments -- government, broadcast, radio frequency (RF), and microwave -- are benefiting from strong recent demand. On the government side, heavy infrastructure spending helped Harris land a $2.2 billion contract from the Federal Aviation Administration last year. High-definition TV is helping to fuel a turnaround in the broadcast business. And on the RF side, the war in Iraq is driving the sales of Harris' satellite and communication systems -- particularly for its Falcon II and Falcon III tactical radios. In fact, just yesterday, Harris popped 4.7% on news that it received a new $2.74 billion order from the U.S. military.

As you can tell, there are lots of parts to Harris, so it's not the easiest business to dissect. Taken as a whole, though, Harris has posted respectable double-digit returns on equity over the past couple of years, and generated a ton of free cash flow in the process. So much of it, in fact, that management has steadily increased its dividend and repurchased shares, all while having enough flexibility to make several key acquisitions. For example, Harris' recently completed $400 million acquisition of Multimax extends the company's reach into the government IT business.

When you combine all of those bullish, high-growth tailwinds with a PEG of 0.66, Harris' shares look pretty attractive on the surface. Personally, I'd need a much lower price to accept such high exposure to Uncle Sam's spending habits -- but that's just me. Several top firms we track on CAPS have scored handsomely by planting an outperform rating on Harris.  

Here are three more CAPS All-Stars who aren't scared of a little government assistance:

• reddingrunner conducts a succinct valuation analysis on Harris and says: "A growth industry with some protection from economic slowdowns, but dependent on large contracts from a few major customers. Still, a historic and projected growth rate around 30% provides a low PEG with much more upside than downside potential."

• gurushankara, meanwhile, addresses Harris' attempts to diversify: "The fundamentals seem to be strong. The acquisition of Leitch added to their range of product offerings in the media server/routing and distribution business. The next 4-5 years is a boom time for Digital TV."

• Finally, jnifer4 leaves us with an interesting political prediction: "After the next election, government spending could likely shift away from military defense for a while, so this stock could temporarily go on sale. Eventually, the political pendulum will swing again toward defense and Harris will be there to capitalize. I think that this is a good long term stock to hold onto."

Get growing, Fool
Does buying high-growth companies at decent prices make complete sense to you? Honestly, how could it not? Join our Motley Fool CAPS community to get more analysis on the above ideas, create your own list of fairly priced growers, or even weigh in with a sharp opinion of your own.

Within moments, you'll have access to stock ideas that can provide the best of both value and growth investing worlds. Oh, and it's absolutely free. Now that's what I call a reasonable price.

Foolish contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool has a disclosure policy.