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One way to find stocks with a better chance to outperform the market is to look for high growth stocks that, for one reason or another, have fallen out of favor, but now have big upside potential. Those stocks would have to show zero debt and generate strong free cash flow.

I have a screening method which shows stock candidates following these lines. Nonetheless, the screening method should only serve as a basis for further research.

The screen's formula requires all stocks to comply with the following demands:

1. The stock is included in the Russell 3000 index. Russell Investment explanation:

The Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable U.S. equity market. The Russell 3000 Index is constructed to provide a comprehensive, unbiased, and stable barometer of the broad market and is completely reconstituted annually to ensure new and growing equities are reflected.

2. Earnings growth estimates for the next 5 years (per annum) is greater than 15%.

3. Price to free cash flow is less than 12, (many investors prefer using free cash flow instead of net income to measure a company's financial performance, because free cash flow is more difficult to manipulate. Free cash flow is the operating cash flow minus capital expenditure).

4. Long term debt to equity is zero.

5. The PEG ratio is less or equal 1.00.

I used Portfolio123's powerful free screener to perform the search. After running this screen on November 21, 2012, before the market open, I obtained as results the 6 following stocks:

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Arctic Cat Inc. (NASDAQ:ACAT)

Arctic Cat Inc. designs, engineers, manufactures and markets snowmobiles and all-terrain vehicles (ATVs) under the Arctic Cat brand name.

Arctic Cat has no debt at all and it has a low trailing P/E of 14.86 and a lower forward P/E of 10.57, the PEG ratio is also very low at 0.93. The price to free cash flow for the trailing 12 months is very low at 7.16 and the average annual earnings growth estimates for the next 5 years is quite high at 16%. Analysts recommend the stock - among the seven analysts covering the stock, three rate it as a strong buy, two rate it as a buy and two rate it as a hold. The company is trading 25.2% below its 52-week high and has 37% upside potential based on the consensus mean target price of $48.67. On October 25, Arctic Cat reported its 2Q fiscal 2013 financial results. On that occasion, the company said that net income rose 17 percent on demand for new recreational vehicles. The company also raised its forecast for the full fiscal year that ends in March. The very low multiples make the ACAT stock quite attractive.

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Chart: finviz.com

Demand Media, Inc. (NYSE:DMD)

Demand Media, Inc., together with its subsidiaries, identifies, creates, distributes, and monetizes in-demand and long-lived content formats.

Demand Media has no debt at all and it has a forward P/E of 17.45, and the PEG ratio is quite low at 1.00. The price to free cash flow for the trailing 12 months is very low at 11.49 and the average annual earnings growth estimates for the next 5 years is very high at 23%. The company is trading 34.4% below its 52-week high and has 48% upside potential based on the consensus mean target price of $12.12. On November 05, Demand Media reported 3Q financial results. The company beat expectations on both top and bottom lines. Compared to the prior year quarter, sales grew significantly and EPS also grew margins expanded across the board. All these factors make the stock quite attractive.

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Chart: finviz.com

Digimarc Corporation (NASDAQ:DMRC)

Digimarc Corporation provides media identification and management solutions to commercial entities and government customers in the United States and internationally.

Digimarc Corporation has no debt at all and it has a trailing P/E of 16.58 and a very low forward P/E of 12.88, the PEG ratio is also very low at 0.96. The price to free cash flow for the trailing 12 months is very low at 8.45 and the current ratio is very high at 9.14. The average annual earnings growth for the past 5 years was very high at 26.62% and the average annual earnings growth estimates for the next 5 years is also high at 17.33%. DMRC pays dividends; the forward annual dividend yield is quite high at 2.46% and the payout ratio is only 40.7%. Analysts recommend the stock - among the three analysts covering the stock, two rate it as a strong buy and one rates it as a buy. The company is trading 43.4% below its 52-week high and has 120% upside potential based on the consensus mean target price of $39.50. In my opinion, the DMRC stock is strongly oversold and has a lot of room to move up.

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Chart: finviz.com

Groupon, Inc. (NASDAQ:GRPN)

Groupon, Inc. operates as a local commerce marketplace that connects merchants to consumers by offering goods and services at a discount in North America and internationally.

Groupon has no debt at all and the forward P/E is quite low at 14.04 and the PEG ratio is very low at 0.73. The price to free cash flow for the trailing 12 months is very low at 7.56 and the average annual earnings growth estimate for the next five years is very high at 27.13%. The company is trading 87.5% below its 52-week high and has 52% upside potential based on the consensus mean target price of $5.12. The GRPN stock has been trading on NASDAQ since November 04, 2011, and since then until November 12, 2012 it had been in a deep downtrend, but from that date it has already gone up 40%. I think that GRPN still has a lot of room to move up.

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Chart: finviz.com

POZEN Inc. (NASDAQ:POZN)

POZEN Inc., a pharmaceutical company, develops products for the treatment of acute and chronic pain, and other pain-related conditions in the United States.

POZEN has no debt at all and it has a very low trailing P/E of 3.95 and the PEG ratio is also very low at 0.13. The price to free cash flow for the trailing 12 months is very low at 3.65 and the current ratio is very high at 20.92. The average annual earnings growth for the past 5 years was very high at 74.08% and the average annual earnings growth estimates for the next 5 years is also high at 30%. The company is trading 31.9% below its 52-week high and has 59% upside potential based on the consensus mean target price of $8.81. The very low multiples make the POZN stock quite attractive.

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Chart: finviz.com

Questcor Pharmaceuticals, Inc. (NASDAQ:QCOR)

Questcor Pharmaceuticals, Inc., a biopharmaceutical company, provides prescription drugs for the treatment of multiple sclerosis, nephrotic syndrome, and infantile spasms indications.

Questcor Pharmaceuticals has no debt at all and it has a very low trailing P/E of 9.82 and even lower forward P/E of 6.32. The PEG ratio is also very low at 0.29. The price to free cash flow for the trailing 12 months is very low at 9.04 and the current ratio is 2.31. The average annual earnings growth for the past 5 years was very high at 38.05% and the average annual earnings growth estimates for the next 5 years is also very high at 33.50%. QCOR pays dividends; the forward annual dividend yield is quite high at 3.12% and the payout ratio is only 30.6%. The company is trading 56.4% below its 52-week high and has 67% upside potential based on the consensus mean target price of $42.86. On October 23, Questcor Pharmaceuticals reported its 3Q financial results. The company beat expectations on both top and bottom lines. Compared to the prior year quarter, sales and EPS grew significantly, margins expanded across the board. The very low multiples and the high dividend yield make QCOR stock quite attractive.

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Chart: finviz.com

Source: 6 Growth Stocks With Big Upside Potential