Two Cheap Growth Stocks To Buy Now

Many investors know how to take their first profitable step in the search for ideal stocks to buy: Look for extraordinary growth potential selling at a significantly low valuation.

Even with markets up double-digits this year, there are still stocks to buy that are trading at a discount to what they're worth.

Now's a good time to look for these cheap stocks to buy, as earnings reports can sometimes ding a share price on missed revenue, even when the long-term outlook is strong.

Analysts often become too bullish too soon, and set up investors for short-term disappointment. They fail to explain that a positive long-term potential might not materialize in today's earnings reports.

Another thing to consider when hunting for the best cheap growth stocks to buy is if the stock has hit Wall Street's radar. Once Wall Street spreads the word to investors to pile in to a stock, the share price will start climbing and you'll miss some of the most explosive gains.

That's why it's most profitable to look for stocks to buy that aren't making major headline news. For example, the 15 companies profiled by Barron's this weekend as single-digit P/Es with good prospects are some of the biggest names on the market. Every investor has considered investing in these stocks to beef up portfolios.

But the best gains are found in stocks that Wall Street hasn't yet pumped money into...

So we found two stocks to buy now that are cheap and boast healthy outlooks.

Our energy pick took a hit this year but is on the rebound. The other is a penny stock with a one-year price target that's nearly twice where it's trading now.

As economic conditions slowly continue to improve, Wall Street and the big institutions will likely recognize the innate value in these growth stocks to buy now, and companies like the following will reap the rewards of increased buying activity.

C&J Energy Services: An Undiscovered Gem

C&J Energy Services (NYSE: CJES), a fracking play, is one of the best cheap growth stocks to buy now.  

The shares currently trade at just seven times earnings and less than two times book value.
Insiders own more than 20% of the shares, so their interests are aligned with outside shareholders.

C&J Energy Services' earnings have been hurt as the country debated over the safety of fracking.

But shale gas and fracking are going to expand globally over the next decade and C&J Energy Services is well positioned to benefit.

C&J Energy Services has nine fracking fleets and 20 coiled tube units that are used in well completion and maintenance. About 71% of its revenue last year was derived from fracking.

In 2011, the company acquired Total Equipment and Services, which manufactures hydraulic tubing pressure pumping and other equipment used in drilling. The acquisition helps relieve manufacturing costs by almost 20%. Almost all of its equipment was manufactured in the last five years, giving the company one of the youngest fleets in the oil and gas industry today, which means replacement and maintenance costs should be low for years to come.

As an added plus for this stock, C&J Energy Services has a strong presence in the domestic drilling markets and is building infrastructure to expand internationally.

The company's earnings have risen at a rapid clip, yet this stock still feels undetected by Wall Street.

Even with triple-digit earnings growth, earnings should still increase by more than 20% a year for the next several years. And with renewed optimism in fracking, CJES' growth will likely carry into 2014.

Hudson Technologies: Room to Run

Hudson Technologies Inc. (Nasdaq: HDSN) is also among the more valuable growth stocks to buy now.  

The company is a dominant player in a niche industry with large growth potential -- providing refrigerant and system services. But the real story is the fact that the company is the largest reclaimer of refrigerant gases in the country.

As various types of gases such as Freon become unavailable due to new regulations, Hudson becomes the only source for the product through their reclaiming operations.  The widely used refrigerant R-22 is in the process of being phased out for environmental reasons and Hudson will become the largest provider of the gas to U.S. customers. By 2020, the agent will be completely phased out of virgin production and prices for reclaimed R-22 that Hudson provides will climb.

When Freon was phased out, prices went from $1 per pound to over $25 a pound and the same pricing pattern should develop with R-22.

Growing interest in cleaner energy and energy conservation are giving the company other opportunities that make this among the stronger growth stocks to buy. Hudson Technologies provides decontamination services and system optimization services for large companies. It's worked for 50 of the Fortune 500 companies.

Hudson's earnings have growing steadily over the past five years, but 2012 should be a breakout year for Hudson as the phase-out of R-22 begins.

The shares trade at just four times earnings right now, making them very affordable among growth stocks to buy.

The stock is even cheaper when you consider the opportunity for dramatic leaps in revenue and profits over the next several years. Institutions have largely ignored the stock and own just 40% of the shares. As more institutions become aware of the enormous growth potential, their buying activity will help push the shares higher.

Both C&J Energy Services and Hudson Technologies, with their exciting business prospects and low earnings multiples, seem like a steal.

Want more cheap stocks to buy now? Check out this penny stock that's up 10% in a few months...

About the Author

Tim Melvin is an unlikely investment expert by any measure. Raised in the "projects" of Baltimore by a single mother, he never attended college and started out as a door-to-door vacuum salesman. But he knew the real money was in the stock market, so he set sights on investing - and by sheer force of determination, he eventually became a financial advisor to millionaires. Today, after 30 years of managing money for some of the wealthiest people in the world, he draws on his experience to help investors find "unreasonably good" bargain stocks, multiply profits, and build their nest eggs. Tim tirelessly works to find overlooked "hidden gems" in the stock market, drawing on the research of legendary investors like Benjamin Graham, Walter Schloss, and Marty Whitman. He has written and lectured extensively on the markets, with work appearing on Benzinga, Real Money, Daily Speculations, and more. He has published several books in the "Little Book of" Investment Series and a "Junior Chamber Course" geared towards young adults that teaches Graham's principles and techniques to a new generation of investors. Today, he serves as the Special Situations Strategist at Money Morning and the editor of Peak Yield Investor.

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