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Jensen: Companies That Make the World Run

Logistics: Aside from when folks see some recent snappy UPS (UPS - Get Report) commercials, this is something few consumers and not many investors really think about very much. However, a huge behind-the-scenes ecosystem exists that allows us to order a Brewmaster 8000 at midnight and have it delivered a few days later, or explains why we can find fresh strawberries at our local grocery store in the dead of winter. It is the backbone of our consumer society, and for investors it provides myriad opportunities to buy fast-growing small-cap firms that could grow into the next Expeditors International (EXPD - Get Report).

Here are two stocks in the space that are growing revenue at more than 20% annually, carry reasonable valuations and have many years of solid earnings growth ahead of them. For growth investors, they provide a good way to gain exposure to this important sector.

Roadrunner Transportation Systems (RRTS - Get Report) provides asset-light transportation and logistics services.

Here are four reasons Roadrunner is a solid growth play at under $17 a share:

1. The company is on track to double revenue this year vs. 2009. This is impressive sales growth, given the tepid economic environment of the last few years. As for its price-to-earnings ratio relative to growth (PEG), the stock sports a small five-year projected figure of 0.36.
2. The industry is very fragmented. This should allow this company to continue making strategic bolt on transactions. It recently took a small $25 million acquisition of an Omaha company that expands its capability to transport refrigerated product.
3. Earnings are growing at a solid clip. The company is on track to making $1.21 a share in 2012, a nice bump up from the $0.82 a share it made last year. Analysts have $1.45 a share in earnings projected for 2013.
4.The seven analysts that cover the stock have a $23-per-share median price target on the stock. Price targets are in a tight range of $22 to $24 a share.

Echo Global Logistics (ECHO - Get Report) provides technology-enabled transportation and supply-chain management services in the U.S. It has a Web-based technology platform that compiles and analyzes data from its network of approximately 24,000 transportation providers.

Here are four reasons Echo Global Logistics is undervalued at $17.50 a share:

1. The company is tracking to more than 25% revenue growth in 2012, and analysts expect another 20%-plus sales increase in 2013. The stock sports a five-year projected PEG of 0.83, under the 1.0 threshold.
2. Earnings are exploding at this fast-growing logistical-software firm. The company has grown EPS consistently and impressively over the past five years. It made $0.11 cents a share in 2007 and should book $0.70 in EPS this fiscal year.
3. The nine analysts who cover the stock have a median price target of $23 a share on Echo Global. Price targets range from $22 to $26 a share, all substantially above the current stock price.
4. The company has gone from a negative $5 million in operating cash flow in 2009 to the current level of more than $18 million in trailing OCF. It also has a cash-rich balance sheet, with almost $50 million in net cash on the books.
At the time of publication, Jensen was long ECHO.

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