3 Promising Stocks You May Not Know

03/15/2012 10:15 am EST

Focus: STOCKS

Richard Moroney

Editor, Dow Theory Forecasts

If you're interested in looking beyond blue-chip growth stocks, consider these sector leaders that pack a lot of value in some great prices, writes Richard Moroney of Upside.

Bio-Reference Laboratories (BRLI)
This company's testing services are used by health-care providers for the detection, diagnosis, and treatment of diseases. The company is the largest independent lab in the Northeast and the fourth-largest full-service provider in the US.

The growth outlook is compelling, reflecting an aging US population, the decrease in the costs of tests, and the development of new specialized tests.

Revenue has increased at least 20% in ten straight quarters, while per-share earnings outstripped the consensus in nine of those quarters. For fiscal 2012 ending October, rising analyst estimates target per-share earnings of $1.39, up 20%. Over the next five years, per-share earnings are expected to increase at a 17% annualized rate.

Bio-Reference was scheduled to report January-quarter results on March 1—two days after Upside went to press. The consensus calls for per-share earnings of 21 cents, up 24%. Revenue is expected to be up nearly 18% to $143 million. [The company beat estimates by five cents, at 26 cents per share, on revenues just under $150 million—Editor.]

Bio-Reference is being initiated as a Buy.

EnerSys (ENS)
This leading maker of industrial batteries is well positioned for growth. The company’s motive batteries are found in forklifts and electric vehicles, while its reserve power batteries are used in the telecom and utility industries.

Impressive December-quarter results sparked a rally in the shares. Per-share earnings jumped 13% to 80 cents—above the 69-cent consensus, and the highest in company history. Revenue increased 13%. Gross profit margin was a healthy 22.8%, partly reflecting price increases.

For fiscal 2012 ending March, analysts estimates target per-share earnings of $2.84, up 13% and above the consensus of $2.66 one month ago. Revenue should increase 16%. For fiscal 2013, the consensus calls for 10% earnings growth on a 6% sales gain.

At 12 times trailing earnings, shares trade nearly 20% below their five-year average. EnerSys is being initiated as a Best Buy.

Tetra Tech (TTEK)
This leading provider of consulting, engineering, and technical services is an attractive pick for year-ahead gains.

Acquisitions and an expanding international presence, particularly in South America and Australia, should help sustain growth. The company is targeting growth markets, including mining, oil and gas, and alternative energy. Tetra Tech is also leveraging its larger footprint to increase cross-selling.

Tetra Tech’s growth outlook is bright. For fiscal 2012 ending September, consensus estimates project per-share profits will rise 13%, followed by a 15% increase in 2013. The consensus calls for sales growth of 13% in 2012 and 6% next year. Over the past five years, per-share earnings increased at an 18% annualized rate, with revenue up 13%.

Tetra Tech’s shares have risen nearly 50% since bottoming in early October. Still, the shares are cheap, with a Value score of 80. At 18 times trailing earnings, Tetra Tech trades at a 30% discount to its five-year average.

The stock also looks cheap relative to its peers in the S&P 1500 as measured by price-to-earnings, price-to-sales, and price-to-free-cash-flow ratios. Tetra Tech is being initiated as a Buy.

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