5 More Undiscovered Growth Stocks

Discoveries are often the fruit of decades of work, especially in medicine. But when the breakthroughs do finally come, they can be so groundbreaking as to change millions of lives.

Or, perhaps, 888 million. That was the 2005 population of the continent of Africa, whose people have been plagued by malaria for centuries. The disease still kills roughly 1 million children annually.

But now, after a dozen years of research, that could be about to change. A unique vaccine called RTS,S -- developed in part by GlaxoSmithKline (NYSE: GSK  ) -- has entered second-stage trials at seven sites across the continent. Doctors hope to improve upon promising early-stage results in which 2,000 children treated with RTS,S were spared from infection by the most deadly form of malaria parasite.

Running with the rebels
Time will tell if they've found the cure that's so desperately needed. But even if they haven't, science, with RTS,S, has taken several steps towards a complete cure. And that's bound to save millions of lives over time.

Freshly minted growth stocks can have a similar effect on a portfolio. Just ask David Gardner, who captains the good pirate ship Rule Breakers. By discovering and then investing in little-known and frequently misunderstood fast movers, 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 4,300 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 15% 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.

SureWest Communications (NASDAQ:SURW)

6

4

22.0%

Marlin Business Services (NASDAQ:MRLN)

7

7

16.0%

Lodgian (AMEX:LGN)

9

5

15.0%

Interline Brands (NYSE:IBI)

5

4

15.0%

Genesis Healthcare (NASDAQ:GHCI)

9

6

15.0%

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 office equipment financier Marlin Business Services and its 0.74 PEG ratio.

Especially important for me are the All-Stars. Those whose stock picks have outperformed more than 80% of the CAPS community account for four of Marlin's seven ratings. One, jabmab440, reports that the firm is "extremely conservative relative to its peers" and that its January 2007 bank charter could be a catalyst for higher returns.

Intrigued? Due 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.

How great is growth? Four of the dozens of stocks in the market-beating Motley Fool Rule Breakers portfolio have more than doubled in two years. Care to find out what they are? Click here to get 30 days of free access to the service.

Fool contributor Tim Beyers, who is ranked 3,251 out of more than 27,800 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. GlaxoSmithKline is an Income Investor pick. The Motley Fool's disclosure policy is an investor's greatest discovery.


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