3 Stocks Ready to Roar

There are plenty of strategies for picking stock winners, from finding low price-to-earnings-ratio 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 just 63 stocks when I ran it, no doubt reflecting the market's turmoil during that time, and included these recent winners:

Source: Motley Fool CAPS Screener; trailing performance from April 30 to July 27.

Dollar Tree, in fact, was previously picked as a stock ready to run in February. 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 58 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; price return from July 2 to July 27.

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

eBay
Compare online auction house eBay to online e-commerce giant Amazon.com (Nasdaq: AMZN), and you have to wonder why more people aren't bidding up eBay's price. Sure, analysts are expecting Amazon to grow at a much faster clip over the next five years, and you've got to appreciate the muscular performance it just turned in, even if the market wasn't so keen on it.

Yet eBay trades at just 11 times earnings (compared to more than 48 times for Amazon) and is about 25% below its 52-week high, making it look to be every bit as good a value.

CAPS member kbdunn9 says as long as eBay continues to stick to its knitting, it represents a good long-term play.

eBay's been beaten up by this market just like other companies, but I think a lot of investors seem to be forgetting that when it comes to online auctions, no other company can match it. It has a strong international brand and should do well in any economy when you consider that people are always looking to buy and sell items online.

Impax Laboratories
Specialty pharmaceutical Impax Laboratories has achieved good success with its generic version of Flomax, a treatment for enlarged prostates, which accounted for two-thirds of the increase in revenue last quarter when it had an eight-week window of exclusivity to market the drug.

CAPS member GearCat likes Impax's fundamentals, joining with the 87% of CAPS members who've rated the drugmaker to outperform the broad market averages. Although it now faces competition for the Flomax generic, it has a license and distribution agreement in place with Shire (Nasdaq: SHPGY) to sell a generic version of Adderall, and also possesses a number of other generic and branded drugs in its pipeline. Impax looks ready to make an impact.

National Financial Partners
Unlike rival risk and insurance brokerage Aon, which is larger and well-capitalized, National Financial Partners, the tiny life insurance distributor and financial services advisor to the wealthy, has had to combat concerns over its own financial viability. It has been able to put much of the worry behind it now, and last quarter turned a profit of $0.16 a share, compared to a sizable loss in the year-ago period.

Highly rated CAPS All-Star member mrindependent has visited National Financial before, but is pleased by its recent success:

I am happy to see that, since my original write-up, the company has crushed earnings estimates for three straight quarters. Thus the recovery appears to be on track-but the stock price has inexplicably crashed recently.

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.