3 Stocks Ready to Roar

There are plenty of strategies for picking stock winners, from finding low P/E stocks to seeking companies selling at a discount to their future cash flows. At the small-cap investment service Motley Fool Hidden Gems, even in this market, the analysts are able to stay ahead of the pack by finding undervalued stocks that Wall Street and investors have ignored.

But what if we could whittle down our list of prospects beforehand, to find those whose engines are just getting warmed up?

Using our investor-intelligence database at Motley Fool CAPS, I screened for stocks that were marked up by investors before their share prices rose over the past three months. My screen returned 165 stocks, no doubt reflecting the market's continued recovery, and included these recent winners:

Source: Motley Fool CAPS Screener.
^From Jan. 22 to April 19.

Best Buy, in fact, was picked as a stock ready to run last October. But while this screen might tell us which stocks we should have looked at three months ago, we'd rather find the stocks that we ought to be looking at today. I went back to the screener and looked for stocks that were just bumped up to three stars or better, sport valuations lower than the market's average, and haven't appreciated by more than 10% in the past month.

Of the 42 stocks the screen returned, here are three that are still attractively priced, but which investors think are ready to run today:

Source: Motley Fool CAPS Screener.
^From March 26 to April 19.

You can run your own version of this screen over on CAPS; just remember that the data's dynamically updated in real time, so your results may vary. That said, let's examine why investors think these companies will go on to beat the market.

Global Payments
Without Western Union's (NYSE: WU) vast network, Global Payments may not enjoy the same operating margins as the larger company. But CAPS member ministorage correctly notes that as more and more payments are handled electronically, the transaction processor stands to benefit from being in one of the best businesses to own:

Payments are clearly becoming more virtual in nature as is the entire retail world. They are poised to take advantage of this and growing credit card use worldwide

OMNOVA Solutions
Specialty-chemicals maker OMNOVA Solutions spent several years trying to get its financial house in order, improving its cost structure in the face of severely reduced demand. That tumult left it looking rather like a piece of garbage, heavily indebted and barely turning a profit.

But the industry is turning, as Huntsman (NYSE: HUN) and KMG Chemicals (NYSE: KMGB) find themselves bouncing back. OMNOVA also enjoyed better volumes and higher profits last quarter, allowing it to beat analyst expectations. As CAPS member AaronRogers pointed out back in January, OMNOVA has legs:

The growth rate is unreal. The guidance is going to be astounding. There volumes are growing in sales. The profitability ratio's are deep value but for a high growth player. Debt levels are being dramatically reduced. Cash Flows are booming. This is going to run for a long time.

Synta Pharmaceuticals
Experimental-drug developer Synta Pharmaceuticals recorded a full-year profit last month, solely on the basis of accelerating deferred revenues related to a failed partnership with GlaxoSmithKline (NYSE: GSK). Yet even absent those revenues, Synta narrowed the losses it incurred last year and is still pursuing a full lineup of drugs. CAPS All-Star cibient was encouraged by management's buying stock on the market earlier this year:

Surge of insider buying inspires confidence. While this means nothing if the drug ultimately doesn't fly, or heavy dilution tramples existing shareholders, the company has a good balance sheet due to the recent capital raise.

Three for free
Are these companies still a good value and ready to make their move? I'm heading over to CAPS to mark them to outperform the broader averages. If you agree join me there, or let us know in the comments section below whether you think these or any other stocks are starting to rev their engines.