3 ‘Buried Treasure’ Stocks Set to Triple

If you want to find a real home-run investment, you are not going to find it in
large-cap stocks. Theyve already had their glory days. Theyll provide you with
stability and reliability, and even a dividend. But the key to outperforming the
market and your peers rests in your ability to hunt down undervalued small-cap
stocks. I have three stocks that have been totally overlooked by the market that
I believe are set to triple from current prices. The stories are beyond
compelling. EZCorp EZCorp (NASDAQ: EZPW ) is exactly the kind of Peter Lynch
stock that deals in an area that some might (wrongly) find distasteful, but is
enormously profitable and totally overlooked. The company owns more than 1,000
pawn and payday loan stores in the U.S., Mexico and Canada. Mexico, in
particular, is a solid new growth engine for EZCorp. As EZPW and its competitors
jockey for position down south, they stand to reap big benefits, as 80% of
Mexicos population are potential pawn customers vs. 20% in the U.S. EZCorp has
been seeing sizable same-store-sales growth in pawn. Analysts are projecting 30%
earnings growth this year, 20% next year and 15% beyond. I believe that 15%
number is low. A 25 P/E on next years earnings of $3 gives EZPW a fair value of
$75, a triple from todays prices. The company has $27 million in cash and about
the same in debt, and is seeing huge increases in free cash flow every year.
Akorn, Inc. Akorn, Inc. (NASDAQ: AKRX ) engages in the manufacture and marketing
of diagnostic and therapeutic pharmaceutical products, hospital drugs and
injectable pharmaceuticals. Akorn is a highly specialized company and has 22
drug applications sitting with the FDA, looking to capture a $3 billion market.
Analysts see 25% annualized growth over the next five years, or 66 cents per
share in 2015, but my own research suggests thats an undervaluation. I see
revenue from a randomized sample of possible approved drug applications vastly
exceeding analysts, and see about $1 per share in 2015, meaning AKRX stock would
have a fair value of $25. In the meantime, the company sits on $134 million in
cash and $99 million in debt. Unlike many pharmaceutical companies, Akorn isnt
burning cash. In fact, it has positive free cash flow of almost $10 million this
year. 8