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Low-priced stocks can sometimes carry higher risks, but often also provide very significant rewards for investors. It's hard to expect a huge company like Exxon-Mobil (XOM) to see its shares double in value, (unless you have a time horizon of many years), especially since so many analysts cover this very well-known company. By contrast, low-priced stocks and companies that are not as well-known, often can be mispriced and valued too low or even too high. But today, let's focus on stocks that appear undervalued by the market, to the point where these stocks could potentially double in value.

These stocks all appear undervalued for various reasons. Some are trading below recent highs, some are trading well below longer-term highs, some are trading at a discount to industry peers, and some have potential catalysts like being the target of a takeover. However, all of these stocks have turnaround potential and traded at much higher levels before the financial crisis and the Tsunami in Japan. That means that if these companies achieve a full turnaround, the share price could revert to historical highs. The industries these companies are in are showing signs of increased demand. Some analysts and industry experts see potential for these stocks to just about double in value from current levels.

An undervalued stock might be able to double after the market fully appreciates the value of all the assets, or if the company is subject to a takeover offer, or if the company produces better than expected earnings. These are just a few factors that can cause a stock to jump, but gains could be accelerated when a stock also has a significant short interest. The stocks below all have catalysts that could cause the stock to double, plus these stocks have a meaningful level of short interest which could add further upside potential.

Many stocks do not have a meaningful level of short interest. For example, even though Apple (AAPL) shares have declined in the past few months, it has a short interest that is equivalent to less than a single day's worth of average trading volume. Because of this, Apple shares are not likely to be pushed significantly higher by short covering. However, all of the stocks below have short interest levels that are equivalent to many days worth of average trading volume. This means it could take days for shorts to cover and that could drive the stock significantly higher. Here are three stocks to consider now:

Radian Group, Inc. (RDN) shares have had a huge run off the lows made in 2012, but big additional gains might still be coming. This stock is acting very strong, and it is starting to feel like a potential momentum play that could go far beyond what many investors and shorts are expecting. Radian provides mortgage insurance, and while this sector has struggled after the housing crisis started, there are signs that the worst is over and that a multi-year rebound is potentially looming.

If you have any doubts about the strength of this stock, just consider that on February 25th, the company announced it would raise capital by selling 30 million shares. This would raise just over $240 million, and improve the balance sheet. While stocks often drop after announcing a capital raise, Radian shares actually went on to hit a new 52-week high of $8.69, just a day after the announcement came out. That is a sign of real strength and it could mean the stock is not done moving higher.

Many home building stocks have doubled in recent months, and that leads investors to consider which housing related stocks could also post big gains. At least one analyst believes that investors should consider Radian shares now, and he thinks the stock could double from current levels. In a recent CNBC article, Jack Micenko of Susquehanna Financial Group stated:

If you missed the home builder stock run of 2012, we believe Radian is the next name with about 100 percent upside from current levels as purchase demand and home prices continue to improve at a modest clip.

CNBC's Jim Cramer has also turned very bullish on Radian shares and he recently called the stock a "steal". He points out that the company is now the largest private mortgage insurer and it expects to return to profitability in 2013. He also notes that even though the stock is up big, it still trades way below book value which is around $14 per share (when tax deferred assets are included). Radian has been posting losses for the past couple of years so the expected return to profitability should continue to drive the stock higher. According to anaylysts' estimates Radian will post nearly break-even results for 2013 and earn $1.11 per share in 2014.

Shorts have been heavily targeting this stock, but recently they have been very wrong and many have been burned as the stock rallied to new 52-week highs. According to Shortsqueze.com, there are nearly 38 million shares short. Based on average trading volume of about 3.4 million shares, the short position is equivalent to around 11 days worth of trading volume. This means that there is a very large short position that could fuel this rally even further.

Risks remain for this company and other mortgage insurers, especially if some type of "Black Swan" event such as a terrorist attack or a financial crisis in Europe develops and puts the economy (and housing) back into a recession. However, the downside appears limited, and a strong infusion of cash from the recent secondary offering lowers balance sheet risks. With some analysts and investors expecting this stock to just about double from current levels, this might be a good stock to consider, especially on any pullbacks.

Here are some key points for RDN:
Current share price: $8.43
The 52 week range is $2 to $8.69
Earnings estimates for 2013: a loss of 20 cents per share
Annual dividend: 1 cent per share which yields .1%

Denison Mines Corp. (DNN) is a stock investors should consider for a variety of reasons. At current levels, this stock looks dirt-cheap. I recently wrote about it since some investors and at least one analyst believes it has "high" potential for a takeover bid. That same analyst at Raymond James also recently upgraded the shares to "outperform". Putting takeover possibilities aside, this stock has significant upside potential to rise for many other reasons, including short-squeeze potential, which I did not touch on in my last article.

Denison owns some world class uranium deposits which are strategically important and used in the production of nuclear power. Uranium prices declined sharply after the 2008 financial crisis and the Tsunami in Japan which subsequently caused a nuclear incident. Japan initially appeared to be ready to turn away from this low-cost power source and it even sold some uranium stockpiles which further depressed uranium prices on the world market. However, all of that seems to be changing and Japan's new Prime Minister, Shinzo Abe is now reversing course on a number of policies. The country now appears poised to once again embrace nuclear power. This could add significant new demand to what is already expected to be a possible supply shortage of uranium in the near future.

China has plans to rapidly increase the build-out of new reactors, and a possible end to a Russian nuclear warhead recycling program later this year could also change the supply picture and push prices much higher. One top industry analyst expects uranium prices to more than double, because of these and other reasons. Analysts at J.P. Morgan (JPM) also appear very bullish and expect uranium to jump from a current $42 per pound to about $70 per pound later in 2013. JP Morgan analysts expect uranium to rise even further, to about $85 (on average) for 2014.

While Denison and other uranium stocks are well below the pre-financial crisis highs and remain neglected by many investors, it appears that this industry is starting to recognize that it is time to invest in this sector for the long-term. There has been takeover activity in the uranium sector recently and analysts expect more to come soon. A recent article states that 2013 might be a great year to invest in undervalued uranium stocks, and it points out that Uranium One (OTC:SXRZF) recently announced it would be bought by ARMZ, for $1.3 billion. Rio Tinto (RIO) also recently offered to buy Hathor for its uranium deposits.

According to Shortsqueeze.com, there are nearly 5.8 million Denison shares short. Based on average trading volume of about 1 million shares, this short position is equivalent to around 6 days worth of volume. This level of short interest could lead to accelerated moves higher for the stock. Especially on good news, such as rising uranium demand, more nuclear power development plans in emerging market countries, a takeover of Denison, or another company in this sector. Shorts seem to be hoping that uranium prices will not rise, or that another crisis (nuclear or financial) will keep investors away from this sector, but those potential risk factors seem unlikely to repeat anytime soon. Furthermore, Denison has a very strong balance sheet with about 40 million dollars in cash and almost no debt. This strong financial position reduces risks for investors.

With recent takeover activity in this sector, and with some industry experts expecting uranium prices to double rather rapidly as increased demand meets with a potential supply decrease (from an end to the warhead recycling program), Denison shares look ripe for gains. After a recent drop along with many other commodity stocks, Denison shares are now oversold and could rebound in the short-term, back to recent highs of about $1.60, and move much higher, if and when uranium prices rise, or if a takeover occurs.

Analysts expect Denison to post nearly break-even results in 2013, and that is based on current uranium prices. If the price of uranium was to double as some analysts expect, this would have a very positive impact on the earnings potential for Denison and for the value of its uranium reserves. Denison shares regularly traded for over $8 before the financial crisis. A double in the price of uranium could create a surge in profits and lead this stock to more than double from current levels.

Here are some key points for DNN:
Current share price: $1.25
The 52 week range is $1.03 to $2.05
Earnings estimates for 2013: Near break-even
Annual dividend: None

Monster Worldwide, Inc. (MWW) runs popular websites for job seekers and employers. Its main site "Monster.com" is widely-used in the United States, Europe, Asia and other areas. Since this company derives a substantial amount of revenues from employers placing help wanted ads, it is dependent on the strength of the employment market. The financial crisis and ensuing recession has resulted in a weak jobs market, and this has impacted financial results. However, there have been signs of improvement in both the unemployment rate and the housing market.

New and existing home sales appear to have bottomed-out and are even showing signs of strength. If housing rebounds further, many analysts and investors believe the jobs market will follow and that could be great news for Monster. Thanks to some recent cost-saving initiatives (which include layoffs), Monster is expected to reduce operating expenses by approximately $130 million per year. Monster is also reviewing strategic alternatives with a top investment banker in an effort to increase shareholder value which could result in the sale of part or all of the firm.

Some investors and analysts believe that a company like LinkedIn (LNKD) could be a likely suitor for Monster since it has a very rich valuation and currently trades for about 100 times earnings estimates while Monster trades for just about 10 times earnings. Furthermore, LinkedIn has a market capitalization of about $17 billion and around $836 million in annual revenues. That puts the market capitalization to revenues ratio at about 16 times. By contrast, Monster looks like a steal with a market capitalization of about $560 million and annual revenues of around $960 million.

If Monster was to trade at a similar (price to sales) valuation as LinkedIn, it could be worth over $100 per share rather than the current price of roughly $5. While Monster is not growing as fast, the valuation looks too cheap to pass up. Furthermore, when a company like LinkedIn has such a high valuation, it makes sense for a company to use its stock as a currency and consider buying rivals. A buyout of Monster could roughly double the annual revenues for LinkedIn. However, Monster could also make sense as an acquisition for other technology or Internet companies, or even a private equity firm. Some analysts consider Oracle (ORCL) or Salesforce.com (CRM) to be a possible suitor for Monster because of its workforce recruiting platform.

Monster has a solid balance sheet with about $175 million in cash and around $195 million in debt. The shares look undervalued when compared to other Internet companies and it trades below book value which is $8.42 per share. Furthermore, the company is profitable and analysts expect it to earn 37 cents per share this year and 42 cents per share in 2014. That gives the stock a reasonable price-to-earnings ratio of just about 13 times earnings.

According to Shortsqueeze.com, there are nearly 29 million shares short. Based on average trading volume of about 1.3 million shares, the short position is equivalent to around 21 days worth of trading volume. That means there are plenty of shorts that could create a short-squeeze if the company releases better than expected news or if it sees a takeover offer. Shorts seem to be hoping that rivals might keep profits from growing at Monster in the future, or that another recession will create another setback, but these risks appear overblown and with expectations low, Monster shares could surprise to the upside.

Analysts seem to believe Monster shares are undervalued. Late last year, investment firm MKM Partners put a buy rating on this stock and set a $9 price target. Robert W. Baird has an outperform rating and a $15 price target on the shares. With the stock at about $5, those target prices would imply a near-double or even more than a double.

Here are some key points for MWW:
Current share price: $5.04
The 52 week range is $4.96 to $10.40
Earnings estimates for 2013: 37 cents per share
Annual dividend: None

Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.

Source: Why These 3 Low-Priced Stocks Could Burn Shorts And Double In Value