3 More Undiscovered Growth Stocks

Can you imagine generating nine years of 20% average annual returns for your portfolio? Fool co-founder David Gardner can. By discovering and then investing in little-known and frequently misunderstood high-growth stocks such as eBay (Nasdaq: EBAY  ) and AOL (Time Warner today), he did just that. History told him that these were the best value stocks available and many became daybaggers.

That's why David and his team at Rule Breakers still seek to get in early on businesses 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 4,400 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% over each of the next five years.

Let's have the list
Now, with that preamble behind us, here are three more growth stocks that have yet to be discovered by many investors.

Company

No. of CAPS ratings

Bullish CAPS ratings

5-Year Growth Est.

PDF Solutions (NASDAQ:PDFS)

13

10

20.0%

Interline Brands (NYSE:IBI)

6

5

15.0%

Moog Inc. (NYSE:MOG-A)

5

5

15.0%

Source: 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 plumbing parts maker Interline Brands, which sports a very reasonable 1.04 PEG ratio.

For CAPS All-Star hirshey, though, it's Interline's revenue growth -- 20.1% annually on average over the last three years, according to Capital IQ -- that will drive returns. Quoting:

Significantly undervalued according to revenue growth projections. Price target should be around $31 a share within the next year or so.

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 three 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 who they are? Click here to get 30 days of free access to the service.

Fool contributor Tim Beyers, who is ranked 4,335 out of more than 29,500 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. Tim's portfolio holdings can be found at his Fool profile. His thoughts on growth stocks, Foolishness, and investing in general may be found in his blog. eBay and Time Warner are Stock Advisor picks. The Motley Fool's disclosure policy is an investor's greatest discovery.


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