It may seem impossible for any stock to stay off Wall Street's radar in 2018. Between electronic filings, social media, and huge resources to invest in discovering the next big thing, no stock is truly hidden from Mr. Market. But there are still times when a stock isn't catching the market's interest, such as when it's just too small for the biggest investors to consider, or when its business is viewed as out of favor or in decline.
And sometimes that means potentially great companies can fall through the cracks, and individual investors can reap the rewards. Here are three that fit this description: NV5 Global Inc. (NVEE +0.00%), Deciphera Pharmaceuticals Inc (DCPH +0.00%), and Beasley Broadcast Group Inc (BBGI 4.85%).
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These companies aren't getting much notice from Wall Street now, but if they continue to deliver solid results, that will certainly change. Read more on to learn why these stocks caught the attention of our Foolish investors, even while Wall Street looks in other places.
This upstart won't stay off Wall Street's radar forever
Jason Hall (NV5 Global): With only four Wall Street analysts covering it, small civil engineering and infrastructure consultancy NV5 Global doesn't get much attention. This shouldn't be surprising, considering the company's total sales were $363 million the past 12 months and its market capitalization is less than $825 million. Microcap stocks rarely get much notice from the biggest investors until they've grown up and become much bigger companies.
But at its pace of growth since going public in 2013, it won't take that much longer before Mr. Market starts paying closer attention.
And the growth looks on pace to continue: First-quarter revenue increased 47% and earnings per share jumped 86%. This surge in growth led management to raise full-year earnings guidance to $2.26-$2.54 per share, up from last year's $1.68 per share when adjusted to exclude a one-time impact from federal tax reform.
That means management expects profits to surge 35%-51% this year. Eventually, the market will catch on, but for now we little guys can buy shares of a fast-growing -- yet still below-the-radar -- company early in its growth phase.
NV5 isn't cheap, trading for between 29 and 33 times 2018 earnings guidance. But small companies growing at such a high rate rarely come cheap. If you can stomach the volatility -- the stock price fell over 20% at one point this year before rebounding to the current 37% gain -- investors willing to buy and hold before Wall Street joins the party could see enormous gains.
A promising biopharma on the rise
Maxx Chatsko (Deciphera Pharmaceuticals): A little over one year ago, Merck made history with a cancer drug called Keytruda, which the U.S. Food and Drug Administration approved to treat cancers based on the genetic profile of tumors, rather than where tumors reside in the body. Others have followed, and some of the early results have been spectacular.
Focusing on the new approach has put several companies on the map. For instance, development-stage company Loxo Oncology is now valued at $5.3 billion after several midstage drug candidates displayed impressive results. And although Deciphera Pharmaceuticals is up over 150% since its debut in late 2017, its earlier stage pipeline is still flying a little under Wall Street's radar.
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The $1.6 billion company is planning a phase 3 trial for its lead drug candidate, DCC-2618, to become a second-line treatment for gastrointestinal stromal tumors (GIST) with a specific genetic mutation. Deciphera Pharmaceuticals reported promising results from a phase 1 trial at the recent 2018 American Society of Clinical Oncology's annual meeting, which supports the leap to a late-stage trial. Management even wisely took advantage of a soaring stock price to conduct a share offering that added about $200 million in cash to the balance sheet.
That will be needed to fund the development of DCC-2618 and two early-stage assets, rebastinib and DCC-3014, which could have more potential than the lead drug candidate. Both are designed to target specific pieces of cellular machinery harbored by a broad range of solid tumors, which could make them an important "add-on" platform for existing immunotherapies -- a tried and true approach to becoming a commercial success in biopharma.
Of course, it's important to stay grounded. Much of the pipeline is still in the earliest stages of development, so although the technical potential for the treatment approach is there on paper, clinical trials have to deliver results before Wall Street pays too much attention. Nonetheless, Deciphera Pharmaceuticals is a biopharma stock investors will want to keep an eye on.
An attractively priced and positioned company in a still solid industry
Chuck Saletta (Beasley Broadcast Group): Radio -- a communications medium older than television, and often considered one that's dying by the day -- still has some life left in it. According to Nielsen's second-quarter 2017 total audience report, the average adult American spends around 1 hour, 50 minutes a day listening to AM/FM radio, and rates have been fairly constant in recent years. Even young adults (aged 18-24) spend nearly 10 hours a week listening to radio, giving hope for radio's future.
A willingness to compete -- and drive consolidation -- in the radio industry is a key reason Beasley Broadcasting Group looks like an attractive potential investment opportunity. After all, when an industry is given up for dead, assets in that industry are often available more cheaply than they would be in a business line that's considered to be rapidly growing. That gives Beasley Broadcasting group the ability to buy productive stations that much more cheaply, thus fueling its own profitable growth.
Through smart acquisitions, Beasley Broadcasting Group has grown to be one of the four largest radio groups in the country, and it is building its digital media presence as well. Yet it has done so largely under the radar of Wall Street's analysts -- with virtually nobody on Wall Street actively following its business. Its operations are profitable and its balance sheet is healthy, giving it plenty of opportunity to continue its growth through consolidation.
By playing in a space few others want to play, Beasley Broadcasting Group may very well be on to a winning strategy. By doing so without attracting much Wall Street attention, it can potentially grow to a decent size before institutional investors really catch on. And that combination -- along with its financial health -- makes it worthy of consideration among ordinary investors looking to buy in before the company hits Wall Street's radar.
