You don't need the investing acumen of Warren Buffett or the riches of a trust fund baby to achieve financial success.

Since the stock market is your best hope for realizing your dreams, start investing today, by putting away small sums of money every month. Then seek out undervalued small-cap stocks for your greatest returns. I like these stocks because they offer opportunities for growth, while still being mostly overlooked by the big investors.

To find these future giants, we'll screen for stocks with market values less than $3 billion, an earnings surprise of 15% or more in the previous quarter, and forecasts for long-term earnings growth potential of at least 15%. We'll filter our findings through the collective investing wisdom of the 165,000 members in our Motley Fool CAPS community. If the best and brightest CAPS players think these stocks hold potential, we ought to take notice, too.

Here are some of the stocks this simple screen found:


Market Cap

EPS Surprise

Avg. Analyst
5-Year EPS Est.

CAPS Rating
(out of 5)

Continucare (NYSE: CNU)

$211 million

$0.09 vs. $0.07



Fuel Systems Solutions (Nasdaq: FSYS)

$482 million

$1.59 vs. $0.91



Medifast (NYSE: MED)

$468 million

$0.33 vs. $0.27



Source: Yahoo! Finance and Motley Fool CAPS.

Of course, this is not a list of stocks to buy -- just a starting point for more research. We need to look more closely at these companies to see whether analysts' faith in them is well-founded. Still, since the CAPS community's helping us out, their favorite selections might be a good place to begin.

An alternative opportunity
Outpatient services provider Continucare has been generating healthy cash flows by effectively watching utilization management, improving its medical loss ratios, and keeping its balance sheet clean. The three primary HMOs it works with account for nearly half of the Medicare Advantage participants in the market it serves. Government cost cuts are expected to fall heavily on this program.

Medicare is ripe for closer scrutiny anyway. For example Amedisys (Nasdaq: AMED) and Almost Family (Nasdaq: AFAM) recently came under the SEC microscope for their Medicare-reimbursement practices. The service providers allegedly scheduled unnecessary home visits of patients in an effort to gain additional payments worth thousands of dollars. After the reimbursement system was changed, far fewer patients suddenly needed the extra visits.  

Continucare isn't involved in the investigation, and it sold off its home health services business years ago, but it could benefit from avoiding even the taint of possible scandal. CAPS member danpuperi says it's a well-run company that should still survive health-care reform:

This looks like a solid health care company. Well run with good margins and returns. Solid cash flow and no debt is always a good thing too. Low P/E ratio, and not a whole lot of growth expected, so the P/E is probably in line with expectations. If the company were paying a dividend (as it seems they should), this would be an easy investment decision. The only downside here might be the negative effects of the health reform bill.

Running on fumes
The non-gasoline engine vehicle market is driving Fuel Systems Solutions, which makes components that allow cars to run on natural gas. Last quarter's strong results benefited from a surge in demand in Italy, where tax credits for alternative-fuel vehicles expired, which pulled many sales forward. Fuel Systems is anticipating that future growth will be affected by the loss of the subsidies, and Wall Street has ratcheted back expectations accordingly. Earnings are forecast to fall by half in the second quarter, with an 18% decline now anticipated for the full year.

Italy made up 60% of Fuel Systems' revenue in 2009, while North America accounted for less than 8%. Yet CAPS All-Star member Melaschasm is looking for conversions to natural gas here at home to help drive the company forward:

CNG vehicles make more sense than battery power, but the government has chosen batteries. The good news is that conversions of other stuff from oil to NG will still benefit this company, including oil based electricity plants that will be needed to provide less expensive electricity for battery powered cars. 

Slimming down
Having support when you're trying to lose weight is a key component for success. Weight Watchers (NYSE: WTW) has long used member meetings as a component of its programs, and Medifast has built on that with its coaching and support centers, not to mention a physician network and clinically proven menus. Despite similarities, Medifast has seen revenue surge, while sales at Weight Watchers and NutriSystem (Nasdaq: NTRI) are apparently on a crash-course diet.

CAPS member toyboatt doesn't see any reason for Medifast to get slothful, either:

Low profit margin (7%) belies the 10 years of excellent ROE, EPS, and sales growth. The diet industry is a safe bet in America, where people are getting fatter while image still rules TV, movies, and even influences success. Plenty of desperate customers to flock to any successful diet products.

Foolish final thoughts
Stock investing is not brain surgery. Finding good, undervalued companies is not as difficult as the professionals want you to think. You just have to commit to starting now, and do so regularly. Now's the time to begin!