Low-Profile Stocks for High Returns

Like the song says, investors are looking for stocks to love in all the wrong places. They'll pile into the momentum stocks everyone else buys, but ignore lesser-known opportunities for fear of straying from the crowd.

Yet the search for undiscovered jewels has informed many of our Motley Fool Hidden Gems picks, from Autoliv to Nuance Communications. Overlooked by Wall Street and Main Street, and thus undervalued, these stocks hold the best potential to deliver outsized returns.

The Motley Fool CAPS community knows a bargain when it sees one. Below, you'll find several under-the-radar stocks that brim with promise. These companies have garnered 100 or less active recommendations on CAPS, despite having double-digit revenue growth potential next year.

Stock	CAPS Rating (out of 5)	No. of Active Picks	Est. Rev. Growth Next Year
Merge Health care (Nasdaq: MRGE  )	***	99	36%
Primerica (NYSE: PRI  )	**	67	15%
Unilife (Nasdaq: UNIS  )	****	46	108%

Source: Yahoo! Finance, Motley Fool CAPS.

Naturally, we want you to look a bit closer at these stocks before buying. Maybe investors are staying away from these stocks for a reason so make sure there's nothing seriously wrong with the company before you plug it into your own portfolio.

Under the radar
More than three quarters of Merge Health care's sales are domestically derived, but a recently announced deal with Brazilian medical imaging technology manufacturer Microdata Tecnologia could signal a significant realignment.

The medical imaging market in Brazil is slated to grow at a compounded rate in excess of 32% annually through 2015 and Microdata has already captured a leading 20% share there. It's going to substitute Merge's technology for one it currently makes, which should help sow gains there. The U.S. spends about 16% of its GDP on health care, tops in the developed world, but the market researchers at Frost & Sullivan estimate Brazil spends a healthy 8% of GDP, ranking it up there with Japan, Spain, and the U.K.

No doubt that's one of the reasons Mindray Medical (NYSE: MR  ) , Becton, Dickinson (NYSE: BDX  ) , and even Fujifilm have found a home there. Not that Merge is relinquishing its push in the U.S. Its acquisition earlier this year of Amicas gives the combined company some 1,500 hospital and 2,200 outpatient facilities in the U.S., while also providing distribution agreements in 35 countries.

CAPS member pug19091 expects that deal alone to drive Merge Health care higher: "AMICAS will help [Merge] grow. It now will dominate the market share in outpatient imaging centers for radiology."

Rev those engines
Spun off from Citigroup (NYSE: C  ) in April, life insurance and financial services provider Primerica is counting on continued economic recovery to drive growth, despite a growing consensus we're limping toward a new recessionary period. With its insurance products geared toward middle- and lower-income families, Primerica's new push on its savings and financial products should benefit no matter which way the economy goes.

The Commerce Department said the savings rate for U.S. households increased to its highest level in eight months as real after-tax incomes rose 0.5% in May while inflation-adjusted spending rose 0.3%. At the same time, consumers have been cutting their debt loads though they remain at elevated levels. According to the Fed, consumer debt as a percentage of disposable income stood at 5.4%, the lowest level since 1995. Though when you add in mortgages, it's just under 16% which puts it back at 2002 levels.

CAPS member trurl9 thinks the financial products provider will resonate with middle-America and its army of agents will generate significant growth.

[Primerica] has no debt. My question is will heads of households be willing to purchase [Primerica's] products? Even so, [their] 10,000 agents are individual contractors so employee salaries are handled through premiums. Policies in force equals recurring revenue.

Sticking to it
Unilife is another recent IPO that had the distinction of quickly being added to the Russell 3000 index and several others soon after going public. It markets ready-to-fill and pre-filled syringes, which with built-in safety features, figures to attract a large market. Sanofi-Aventis (NYSE: SFY  ) certainly thinks so, as it was willing to pay Unilife a $12.5 million exclusivity fee for two years as well as an additional $21.4 million paid to industrialize the syringes.

raidoh wants to see some consistent signs of growth beyond Sanofi before he's willing to invest real money in it, but all the signs point to a big future.

Their current financial report is skewed by the rather large deal they made with Sanofi-aventis, but it's promising that they've been tagged by such a big player in the pre-filled syringe industry. I haven't purchased stock for my portfolio yet, because I'd like to see 1-2 more quarters of positive earnings (it's an investment, not a bet), but they are high on my watch list.

Keep a high profile
Sign up today for the completely free Motley Fool CAPS service, and tell us whether these low profile stocks are on their way to higher returns. There you can read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page.