Stocks to Buy: Huge Growth for a Bargain Price

Some of the most exciting stocks to buy are those with impressive growth potential.

Companies that are able to grow earnings for a long period of time can often see their stock prices soar for years, creating tremendous wealth for shareholders. Stocks to Buy: Huge Growth for a Bargain Price

Unfortunately, much of what passes for growth stock investing today is really momentum investing in disguise. Today's growth stock investors all tend to own and trade the same really popular companies that have already experienced significant price appreciation.

While it may be exciting to share cocktail party chatter with friends about the shares of Apple Inc. (Nasdaq: AAPL) or Green Mountain Coffee Roasters Inc. (Nasdaq: GMCR), odds are that the real growth and profit opportunity has passed.

It makes more sense for growth investors to look for stocks of companies that have been growing sales and earnings at a consistently high rate, but are off Wall Street's radar. Companies that have very high rates of institutional ownership and lots of analyst coverage from the major firms are more than likely fully priced. All the growth potential is well defined and everyone already owns the stock.

The big rally moves in growth stocks come when the institutional money discovers the company and intense buying pressure develops as they all pile into the stock, pushing prices dramatically higher.

One such company that fits the bill now is CPI Aerostructures Inc. (NYSEAMEX: CVU).

Stocks to Buy: CPI Aerostructures (NYSEAMEX: CVU)

CPI Aerostructures builds structural components for military and commercial aircraft as a subcontractor.

CPI has been off Wall Street's radar screen; in fact, some investors have been selling, afraid the sequester would hurt the share price.  

What many are overlooking is that this company has been growing at an impressive pace. Sales and earnings have both averaged increases of over 30% for the past five years. In the most recent quarter, the company reported record sales and profits for the quarter and the full year.

CPI Aerostructures has acknowledged that the sequester may cause growth to slow in 2013, but beyond that the company is well positioned to regain a strong growth track.

The company has a $392 million backlog and a strong bid pipeline. Many of its military programs such as the Hawkeye Surveillance aircraft and UH 60M Blackhawk are not expected to be effected by the projected cutbacks in military spending. Commercial markets are recovering quickly and new demand is starting to emerge for next generation business jets such as the Gulfstream G60 and Cessna Citation X where the company already has subcontractor status.

While 2014 may show some weakness the expectations are that this company will recover its plus-30% earnings growth rate after that.

But, here is what Wall Street is really missing about CPI Aerostructures...

As institutional investors have abandoned the stock over sequester and defense budget concerns, they have pushed it down to such a bargain price that the company could be liquidated at a small profit. The company balance sheet shows $119 million of short-term assets including $2.7 million of cash and a little over $116 million in receivables. When you consider that the receivables are large established commercial aviation firms and government contractors, they are as good as cash.

CPI has a total of $44.2 million of liabilities and debts. That leaves a net current liquidation value of about $75 million and the market cap of the stock is just over $71 million. This calculation does not include about $4 million of computers, trucks, cars and other machinery owned by the company.

Wall Street's narrow focus has created an incredible bargain in a growth stock that is experiencing a very short-term pause in its high rate of sales and profit expansion. CPI has been profitable nine of the last 10 years, and every year since 2006. Earnings may slip back to $1 a share in 2013, but that should begin growing rapidly again in 2014 to over $1.20. 

The stock is trading at less than nine times earnings in spite of excellent corporate performance and profitability.

When Wall Street discovers the mistake it has made, institutional investors will flock back to these shares and the buying pressure should push prices markedly higher. Shares traded hands at twice the current price a year ago, and CPI Aerostructures could recover much of that ground late in 2013.

For more stocks to buy, check out this list of five companies Warren Buffett and insiders can't get enough of right now.