The reason that I love investing in micro caps so much is because you can find growth companies trading at value prices, asserts Richard Howe, editor of Cabot Micro-Cap Insider.

To buy a fast-growing large-cap stock, you have to pay up. Instead of paying 15x earnings, you have to pay 30x earnings, or if it’s a tech company, 30x sales.

In the micro-cap world, it’s possible to find tiny companies growing at 40% per year trading at just 10x earnings. Let me introduce you to Medexus Pharma (Vancouver: MPD) (MEDXF).

Medexus Pharma is a Canadian specialty pharma company that is growing at a rapid clip. Its drugs treat chronic conditions and as a result its business had limited headwinds from COVID-19.

In March 2020, it completed a transformative acquisition of a drug call XINITY, which treats hemophilia.

MoneyShow’s Top 100 Stocks for 2021

The top performing newsletter advisors and analyst are back, and they just released their best stock ideas for 2021. Get your FREE copy of MoneyShow’s 2021 Top Picks report here and see why the nation's leading investment experts believe these stocks will significantly outperform the market in 2021.

The transaction was transformative because Medexus got to acquire all the gross profits that the drug generates but only had to hire a few additional employees to support it. As a result, Medexus instantly transformed from a break-even company to a wildly profitable one.

Revenue is growing at 44% per year and the company is on pace to generate $8 million of free cash flow. As such, the stock is trading at 11.6x free cash flow, an incredibly cheap valuation for a rapidly growing company. On an EV/Revenue basis, MEDXF trades at 1.1x while slower-growing peers trade at 3.6x.

When cheap, fast-growing micro caps can get discovered by larger institutional investors, and it’s very easy to get multi-baggers. If Medexus traded in line with peers, it would be a $15 stock, implying almost 200% upside from its current price.

Subscribe to Cabot Micro-Cap Insider here…