5 More Undiscovered Growth Stocks

Discovery. According to the online edition of the Merriam-Webster Dictionary, it's the act or process of discovering something.

But for the rest of us -- especially investors and entrepreneurs -- the word really refers to something that will make us rich. Witness the current frenzy in the Arctic. The Associated Press reports that warships from Canada and Denmark are squaring off in a race to claim riches left uncovered -- oil and diamonds, for example -- as the polar ice cap melts under the bright lights of global warming. 

Running with the rebels
I find the tale both tragic and instructive. Human greed, it seems, knows no bounds. Then again, it isn't just greed at work up north. There's an inbred thirst for discovery in us all, and it has as much capacity for good as evil. Witness our quest for the stars, or the ongoing battles against cancer, AIDS, and other deadly diseases.

Discovery is frequently a wonderful process -- especially when it comes to stocks. Just ask David Gardner, who captains the good pirate ship Rule Breakers. By discovering and then investing in little-known and frequently misunderstood growth stocks, he produced nine years of 20% average annual returns. History told him that these were the best value stocks available.

That's why David and his team still seek to get in early on stocks that are reshaping, or creating, important industries. You can, too, with the help of our completely free-of-charge Motley Fool CAPS investor-intelligence database, which currently contains information on more than 4,000 stocks.

CAPS applies user input to rate stocks from one to five stars. So, using CAPS, we're once again going to search for stocks that haven't yet met the threshold for a star rating, that have a minimum $250 million market cap, and that are expected to grow their earnings by at least 20% annually over each of the next five years.

Let's have the list
Now, with that preamble behind us, here are five growth stocks that have yet to be discovered.

Company

No. of CAPS ratings

Bullish CAPS ratings

5-year growth est.

ValueVision Media (NASDAQ:VVTV)

6

4

30.0%

SureWest Communications (NASDAQ:SURW)

5

3

22.0%

MedCath Corp. (NASDAQ:MDTH)

12

8

20.0%

First Mercury Financial (NYSE:FMR)

6

6

20.0%

Enterprise Financial Services (NASDAQ:EFSC)

6

5

20.0%

Sources: Motley Fool CAPS, Yahoo! Finance.

Bear in mind that this isn't a list of recommendations. Instead, I offer these stocks as candidates for further research. My favorite, however, is insurer First Mercury and its 0.45 PEG ratio. That suggests a wide discount to fair value and is enough to get me to add shares to my CAPS portfolio.

Intrigued? Do your own due diligence and then check in with thousands of other investors at CAPS. And, if you'd like, add your own commentary. You'll be helping your fellow Fools and testing your ideas at the same time. Click here to get started now; it's 100% free to participate.

See you back here next week for five more undiscovered growth stocks.

Fool contributor Tim Beyers, who is ranked 784 out of more than 25,200 in CAPS, is a sucker for growth stocks and a regular contributor to Rule Breakers. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. All of his portfolio holdings can be found at Tim's Fool profile. His thoughts on growth stocks, Foolishness, and investing in general may be found in his blog. The Motley Fool's disclosure policy is a Fool's greatest discovery.


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