7 Growth Stocks on Sale

What's your investment style? Sooner or later, all investors are faced with the challenge of having to answer this pretty loaded question. Are you a Rule Maker or a Rule Breaker? A grow-getter or a value-seeker? A 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 putting 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 above 20% and PEG ratios below one, these stocks have received a four or five-star rating from our pool of 25,000 individual and professional investors.

Company

Est. 5-yr Earnings Growth Rate

PEG Ratio

Current CAPS Rating

Brasil Telecom (NYSE:BRP)

49%

0.32

****

Rowan (NYSE:RDC)

27%

0.28

*****

Helix Energy Solutions Group (NYSE:HLX)

25%

0.40

*****

Aircastle (NYSE:AYR)

25%

0.74

****

NDS Group (NASDAQ:NNDS)

24%

0.88

*****

W&T Offshore (NYSE:WTI)

23%

0.45

*****

Homex Development (NYSE:HXM)

21%

0.86

*****

Data from Yahoo! Finance and Motley Fool CAPS

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, though, Homex Development appears to be an attractive market-beating bet.  

Running for the border  
Homex, one of Mexico's largest and most diverse homebuilders, has grown its business pretty fast over the years, and our CAPS community is starting to take notice. Currently, 35 All-Atars give the Culiacan-based developer an outperform rating, while a big goose-egg is laid on the underperform side of the scorecard. Overall, there's a 97% bull ratio on Homex.

As a natural contrarian, I don't always agree 100% with the sentiment of our CAPS community, but with Homex, I think they've hit the nail right on the head.

Although the U.S. housing market continues its excruciating search for a bottom, Mexican real estate is, well, pretty hot and spicy these days. As President Calderon makes good on his promise to provide accessible financing to low-income families, while North American baby boomers start to really fly south, Homex Development should be in the top spot to capitalize. Just why is that the case?

Well, it all boils down to Homex's strategy to tap the wide-ranging trends taking place in the country. Homex initially fueled its growth by offering the lowest average price in the entry-level market. Recently, however, management has focused on higher-return opportunities within the middle-income and even resort markets -- areas which accounted for less than 25% of Homex's revenue in 2006. So, taken all together, Homex looks like a diversified way to gain exposure to favorable Mexican tailwinds (hope that comes out right).

Also, with a forward P/E of 15, Homex trades at a considerable discount to its expected long-term growth rates and to its ailing American peers like Toll Brothers and Pulte Homes. It's that seemingly "loco" valuation -- coupled with the growth prospects we mentioned earlier -- that prompts fellow Fool Will Frankenhoff to suggest we build a position in Mexico's best builder.    

These three CAPS members also think there's no place like Homex:

  • weworkharder loves Homex as a play on Calderon's political support and says, "The Mexican government is subsidizing the growth of homeownership in Mexico, and this is the dominant builder across geographies and price points, and stands to gain the most from this macroeconomic trend."
  • lojet contrasts Homex with our home-based alternatives and believes it's an easy decision: "The US housing market may be bumpy for awhile, but the Mexican economy seems to be picking up steam. This company is the dominant housing builder and has lots of room to grow."
  • And FoolishLav uses the high end to build a case for Homex: "Mexico's own slowly growing middle class, and more and more U.S. retirees, and from other countries, too, will bring on a sustained rise in residential and other home building in this under-appreciated land. Mi casa es su casa!"

Get growin' Fool
So, does the sound of buying high-growth companies at decent prices make complete sense to you? More appropriately, 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.  

For more CAPS Foolishness:

Foolish contributor Brian Pacampara built his house one card at a time and owns no position in any of the companies mentioned. The Fool's disclosure policy was built to last.


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