There's Enormous Hidden Value in These 3 Little-Known Stocks

Wall Street sometimes ignores the best values in the stock market. We cast a spotlight on three under-appreciated companies that are on the verge of breaking out.
By Chiradeep BasuMallick ,

Markets have a habit sometimes of ignoring solid stock opportunities that get lost amid the "white noise" of larger movers and shakers.

But a few of these lesser-known picks confer the promise of robust growth and steady income generation. Let's look at three of these players and discover their hidden value.

DATA

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Tableau Software (DATA) - Get Report

Tableau's stock has seen a downtick of 18% in the past three months. The data visualization software provider is suddenly plagued by a bout of weakness, just ahead of its earnings.

Having said that, Tableau has huge potential. The company beat its last four quarter earnings estimates by a massive margin. This year could be weak overall, with earnings-per-share falling by 23%, but 2016 is expected to see a healthy 67% rise. The best thing about the upcoming quarters is Tableau's sharp growth curve; revenues have been on a constant upswing year on year.

Critics feel Tableau faces tough competition from the likes of Microsoft, IBM, and Amazon. However, this small-cap star is strong enough to hold its own. Tableau recently cemented a partnership with consulting giant Deloitte. Existing Tableau partners include Adobe and Cognizant, and it has also forged an alliance with health care IT major Cerner.

Tableau's strategy is to not singularly focus on small to medium-sized companies, but to engineer a more enterprise-centric approach. From a valuation perspective, Tableau is capable of maintaining high growth rates. The market suggests a trailing 12-month price to sales multiple of 11.

The company's three-year average revenue growth stands at a whopping 88% while net income is pretty decent at 20%. Free cash flow as a percentage of net income has been improving constantly over the last five years, opening up dividend opportunities for the future.

WDAY

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Workday (WDAY) - Get Report

Workday creates enterprise cloud-based applications for the HR space and other associated areas. The last six months haven't been kind on the stock, which has dropped almost 10%.

That isn't the whole story, though. Revenues are growing at double-digit rates. The company is clearly focusing on quality of revenues and a stable bottom line boost. This year earnings-per-share growth is estimated at 75% and this pace is scheduled to zoom 175% next year.

Revenues remain between the 30%-to-50% growth-band, which is excellent. Billing growth has been strong too, with a 51% rise in the second quarter.

The company's competitive win rates have helped it garner incremental revenues in the software as a service space. As gross margins improve steadily and the unearned revenue data metric climbs consistently, Workday is clearly healthy and more importantly, on the right track.

In short, its fundamentals are far better since it went public, and its fast revenue growth is sure to attract investors sooner or later.

MOH

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Molina Healthcare (MOH) - Get Report

Molina's stock saw a 14% price drop in the last 90 days. The company, which provides health care services to individuals receiving government assistance, is quite the standard for stable performance.

A 10-year average revenue growth of 23% shows that business has remained reliable and sturdy. Profitability improved with a three-year net income growth at 44% against a five-year rate pegged at a modest 15%. At the current price of $65, the stock is practically available free of cost as it delivers a cash per share of $64 (most-recent quarter).

The company is also on the cusp of a high-earnings trajectory, which is why the stock needs to be picked up at the earliest. Molina's last five-year earnings growth is at around 1.25% -- at best anemic -- but the next five years will see a 34% surge, which is more than twice the rate at what the industry is expected to grow at the same time.

Leveraging Obamacare's expansion of health insurance for the poor, Molina has immense potential to outperform the market. It also possesses the cash-muscle to make meaningful acquisitions and build scalability. At 18 times forward earnings, the company is without doubt a value generator.

To learn about other tech stock opportunities that most investors are foolishly ignoring, click here.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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