Investors often give short shrift to stocks that don't dominate the headlines. They tend to focus on the big names such as Apple or Amazon but ignore solid companies that could reward them with riches down the road.

Fact is, hidden within the stock market are little-known companies with huge potential. Below, we examine three that are good values now. Each is set to outperform in 2016; you should get in on the action now.

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1. Cullen/Frost Bankers (CFR - Get Report)

Cullen/Frost Bankers offers a host of commercial and consumer banking services, as well as trust and investment management, mutual funds and investment banking.

Trading at 13.8 times forward earnings, it's one of the cheapest stocks in its peer group. Its annual dividend yield at 3% could also be quite the deal-clincher for investors looking for under-appreciated companies poised to break out.

The company declared 53 cents as the dividend pay out for its most recent quarter, taking 2015 dividend payments to $2.10 a share. This is at least the fifth straight year when Cullen/Frost's shareholders received a higher dividend year on year.

On a total returns basis, Cullen/Frost gained 19.07% in the last three months compared to the 12.5% for the S&P 500.

Why did Cullen/Frost zip past you, without grabbing your attention? It could probably be attributed to its single digit growth rate (three-year average) for both revenues and profit margins.

However, net margins improved to 27% (as compared to the industry's 23.1%) in the trailing twelve months, suggesting that the bank's relationship-driven approach found favor among its customers.

On return-on-equity, Cullen/Frost is at 10.5%, ahead of the industry average of 8.9%.

For the road ahead, Cullen/Frost can depend on its core strength as a high-quality regional bank with a proven track record of success even in the most challenging of market environments.

Unlike Wall Street's banking behemoths, Cullen/Frost is conservative in its approach to banking and has a history of weathering turbulence -- it survived the oil and real estate crisis of the 1980s without being taken over or requiring government assistance. In a similar vein, Cullen/Frost declined TARP bailout funds during 2008's financial crisis.

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2. Packaging Corporation of America (PKG - Get Report)

Packaging Corporation of America is another unrealized gem -- it sports a forward earnings ratio of 13.8 times and a dividend yield over 3%.

The producer of container boards and corrugated products reflected tremendous growth in recent times. Its three-year average revenue upswing of 30.7% (as compared to the industry's 5.3%) is indicative of a superior strategic blueprint.

Net income growth has been even better for this period with the company delivering an average of 35.4% for the last three years, against a measly 6% for the industry. In fact, Packaging Corporation is a superior operator on almost every parameter when compared to its industry -- return on equity, return on assets, operating margin and net margin.

And yet, you've probably never noticed this stock; it doesn't enjoy a premium valuation.

We predict a change is in the offing. For dividend lovers, there's enough reason to take another look at this stock; dividend payments have risen by 20% year-on-year for the last five years. The company has already declared a total of $1.65 per share (in three quarters) and another dividend payout is right around the corner.

The company's also protected in the future by a strong demand for its corrugated packaging segment. Extremely cost-effective, this key slice of Packaging Corporation's product mix should provide a hedge against a possible economic slowdown.

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3. Timken Company (TKR - Get Report)

The Timken Company manufactures mechanical components; its shares witnessed an upswing of late, after the announcement of a new plant in Romania.

At forward earnings multiple of 14.7 times, Timken is attractively priced compared to peers like Stanley Black & Decker (16.5 times) and Snap-On Inc. (19 times).

Interestingly, the stock hasn't capitulated to negative short-term factors that are troubling Timken's industry -- the slowdown in Chinese industrial production, and the global weakness in agriculture, metals and mining, and oil and gas.

Timken's dividend yield is at over 3.2% and its dividend payout is poised to grow by 3% in 2015 (with the latest quarterly dividend at 26 cents per share) to $1.03.

Dividends have improved the company's total returns landscape -- Timken has returned nearly 9% compared to the S&P 500's less than 1% gain over the last one month.

The company has also initiated a share buyback program and around the end of October it had about 3 million shares remaining for the completion of its existing plan.

Timken has kicked-off an aerospace restructuring process to address operational challenges (launched in the third quarter of 2014). It's also architected an enterprise-wide cost-reduction program.

These stocks aren't the only unsung heroes of the stock market. We've found a small-cap stock that has the potential to surge 100% or more in the coming months. This is a growth story with major momentum, so it's important to learn the full details as soon as possible. The stock is trading under $8 a share, and its long-term prospects have never been better, making it a great value. We expect this rocket could take off soon, so be sure to click here now and learn more.

 

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