I won't say I told you so. (But I did.)

Less than three months ago, I highlighted three past picks from the Motley Fool Hidden Gems small-cap investing newsletter. Three hidden gems that, in the months since we first recommended them, either dropped in value, went more or less nowhere, or rose in value -- but less than they deserved to based on their business performance.

One of those three, satellite telecommunications equipment maker Radyne (NASDAQ:RADN), reported earnings at market close Wednesday. Radyne stock jumped 17% in after-hours trading. If that doesn't impress you, click here to see how Radyne had performed before that good news. What you're looking at, my friends, is a 39% increase in market capitalization in a little more than two months' time. Tack on this week's gains and the company has jumped 50% in value since May 25, 2005.*

So what's underlying the growth in price? Growth in sales and profits, of course.

Radyne announced an astounding 71% improvement in quarterly sales in Q2 2005 vs. Q2 2004, a number swelled by its recent acquisition of Xicom. Profits followed close behind with a 57% improvement, and profits per diluted share brought up the rear at 50%.

Ordinarily, when revenues skyrocket and profits per share just, er, rocket, a Fool can be forgiven for suspecting that old bane of investors: stock dilution. As I discussed in "Give a Hoot. Don't Dilute," companies such as Apple (NASDAQ:AAPL) and EMC (NYSE:EMC) have set a precedent in the tech world for delivering outsize profits, then swiping much of those profits by issuing stock options to corporate insiders. Not so with Radyne. Over the past year, the company has grown its share count by just 1.1%.

The real reason Radyne's profit growth didn't quite keep pace with its sales was that the company paid very low taxes last year. Sales may have grown 71% in Q2 2005, but the IRS's share of those sales grew 1,200%! Had the company's taxes increased at the same rate as sales, Radyne would actually have grown its profits by 136% -- far outpacing sales growth.

However, all of the above only partly explains Radyne's 63% increase in price over the past 70 days. In this Fool's opinion, the primary reason that Radyne has done so well is that the company was drastically undervalued. In contrast to Hidden Gems recommendations Buffalo Wild Wings (NASDAQ:BWLD) or FARO Technologies (NASDAQ:FARO), which captured the fancy of stock market investors shortly after we recommended them, Radyne never really caught on among the general public. Back in May, the company still sported an enterprise value-to-free cash flow (EV/FCF) ratio of just 8.1 -- meaning that more than a year after we recommended it, this gem remained hidden, and it remained a bargain.

Which has me feeling more convinced than ever that our most rewarding investment ideas at Hidden Gems aren't necessarily the two new picks we provide our members every month. Our best prospects just might be the small-cap companies hiding in our back issues. The ones that the world has forgotten, or will never find. To read more about why we like these and more than 45 other small-cap stocks, Fool co-founder Tom Gardner is offering a free 30-day trial to Hidden Gems. Simply click here to learn more.

*Incidentally, if you're wondering how the other two companies we highlighted back in May fared, Portfolio Recovery Associates (NASDAQ:PRAA) has gained 9% (twice as much as the S&P 500 gained over the same time frame) and Deckers (NASDAQ:DECK) is up 27% (six times as much).

Laggards.

Fool contributor Rich Smith owns shares of Deckers, but not of any other companies named above. The Motley Fool's disclosure policy is hidden in plain view.