It's the dream of nearly every investor – finding a stock that is flying under the radar of most large investors.
The obvious difficulty with this idea is finding the stock BEFORE everyone else does.
And just to make it clear, I'm not talking about speculating in start-up biotech companies or mining exploration companies hoping to strike it rich overnight. This strategy rarely pays off and you are probably better off spending a night out at the casino!
Instead, I'm on the lookout for fast growing companies that have already built a strong track record, but possess the potential for above average earnings growth in the future.
So with that in mind, here are three stocks currently trading under $1 that could grow into great investments:
1. Mobile Embrace Ltd (ASX: MBE) – Last trading at 22 cents per share, Mobile Embrace is a mobile marketing and payments company based in Australia, but it is rapidly expanding into overseas markets. It recently announced its best ever quarter where it more than doubled its revenues compared to the previous corresponding period. Mobile Embrace has acquired a number of businesses over the past 12 months and this has complemented the strong organic growth the company has been able to deliver both domestically and internationally. Importantly for investors, the company is already profitable and encouragingly, the company is forecasting strong growth over the remainder of FY16 with revenues expected to grow at double-digit rates over each quarter. Despite these positives, investors do need to be aware that the company has recently been issued with a $4 million claim against one of its subsidiaries which it will need to defend itself against.
2. Capitol Health Ltd (ASX: CAJ) – Capitol Health is one of Australia's fastest growing diagnostic imaging service providers and last traded at 52 cents. The share price has more than halved since the start of April as the market ponders whether Capitol Health's acquisition strategy is sustainable. Compounding the situation is the ongoing review of the Medicare Benefits Scheme and the impact this may have on Capitol Health's revenues moving forward. Despite this, it continues to acquire businesses at reasonable prices in a highly fragmented industry that has a number of tailwinds behind it. At the current price, investors who are risk tolerant may find this to be a good entry point for a long-term investment.
3. Empired Ltd (ASX: EPD) – Empired has a market capitalisation of $99 million and last traded at 83.5 cents. It is Australia's largest dedicated Microsoft focused IT services business that has been servicing some of Australia's largest corporations since 1999. More recently, it has secured a number of large contracts and upgraded its FY16 revenue guidance to between $155-$175 million. In order to service these new contracts, Empired has had to invest in additional staff and this is likely to place pressure on margins over the coming year. Despite this, Empired remains one of Australia's fastest growing technology companies and should have a place on the watchlist of every growth investor.
