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If you're looking for potentially undervalued growth names, the following list might offer a good starting point.

The following is a list of high growth stocks, as defined by past sales growth and projected EPS growth. Additionally, all of these companies are generating significant amounts of free cash flow, when expressed as a percentage of market cap. To further refine the quality of the list, we only focused on those stocks that have seen significant institutional inflows over the last quarter.

To create the list we started with a universe of over 120 stocks with the following characteristics:

  • Market cap > $300M
  • Sales growth over last 5 years > 20%
  • Projected EPS growth over next five years > 20%

We then collected data on levered free cash flow, and identified the companies that have significant levered free cash flow, when compared to current valuations. (Note: Levered free cash flow is the free cash flow available to the company after paying interest on outstanding debt. It is a measure of the cash flow that is truly available to the company).

The smart money seems to think these names are a potential safe bet on growth stocks -- what do you think? Full details below.

Past sales data and EPS growth projections sourced from Finviz, institutional trading data sourced from Fidelity, and levered free cash flow data sourced from Yahoo! Finance.



List sorted by levered free cash flow as a percentage of market cap.

1. ChinaCast Education Corporation (OTCPK:CAST): Education & Training Services Industry. Market cap of $311.13M. Sales have grown by 33.88% over the last five years, with EPS growth projected at 30.0%.

TTM levered free cashflow at 80.03M, which represents about 25.72% of current market cap. Over the last quarter, institutional investors purchased net 3.4M shares.

CAST is currently stuck in a downtrend, trading -14.59% below its SMA20, -18.13% below its SMA50, and -11.59% below its SMA200. It's been a rough couple of days for the stock, losing 11.35% over the last week.

2. MedAssets, Inc. (MDAS): Healthcare Information Services Industry. Market cap of $939.67M. Sales have grown by 31.73% over the last five years, with EPS growth projected at 20.71%.

TTM levered free cashflow at 187.64M, which represents about 19.97% of current market cap. Over the last quarter, institutional investors purchased net 903.8K shares.

The stock is currently stuck in a downtrend, trading -10.76% below its SMA20, -15.61% below its SMA50, and -20.77% below its SMA200. The stock has had a couple of great days, gaining 12.7% over the last week.

3. Tower Group Inc. (TWGP): Property & Casualty Insurance Industry. Market cap of $998.66M. Sales have grown by 46.02% over the last five years, with EPS growth projected at 23.67%.

TTM levered free cashflow at 156.28M, which represents about 15.65% of current market cap. Over the last quarter, institutional investors purchased net 105.4K shares.

TWGP has a relatively low correlation to the market (beta = 0.59), which may be appealing to risk averse investors. The stock has gained 12.58% over the last year.

4. CTC Media, Inc (CTCM):
TV Industry. Market cap of $3.42B. Sales have grown by 20.42% over the last five years, with EPS growth projected at 69.0%.

TTM levered free cashflow at 370.55M, which represents about 10.85% of current market cap. Over the last quarter, institutional investors purchased net 769.4K shares.

Note that this is a risky stock that is significantly more volatile than the overall market (beta = 2.29). The stock has had a couple of great days, gaining 5.17% over the last week.

5. Open Text Corp. (OTEX): Application Software Industry. Market cap of $3.29B. Sales have grown by 17.07% over the last five years, with EPS growth projected at 23.7%.

TTM levered free cashflow at 231.30M, which represents about 7.03% of current market cap. Over the last quarter, institutional investors purchased net 2.3M shares.

The stock has gained 20.83% over the last year.

6. Teck Resources Limited (TCK): Industrial Metals & Minerals Industry. Market cap of $32.04B. Sales have grown by 17.49% over the last five years, with EPS growth projected at 26.5%.

TTM levered free cashflow at 2.19B, which represents about 6.84% of current market cap. Over the last quarter, institutional investors purchased net 23.3M shares.

After a solid performance over the last year, TCK has pulled back during recent sessions. The stock is -6.45% below its SMA20 and -11.62% below its SMA50, but remains 17.15% above its SMA200.

7. Research In Motion Limited (RIMM): Diversified Communication Services Industry. Market cap of $33.91B. Sales have grown by 61.75% over the last five years, with EPS growth projected at 21.59%.

TTM levered free cashflow at 1.97B, which represents about 5.81% of current market cap. Over the last quarter, institutional investors purchased net 4.3M shares.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 7 Cash-Rich, High Growth Stocks Seeing Institutional Buying