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By Marc Roberts

Some companies are still in growth mode. When profitable companies do not pay substantial dividends, it frees up money for debt reduction, stock buybacks and other similar uses of cash that can result in enhanced stock prices. I will look at five speculative companies that have been punished by the market, with a 30% drop in share price over the last twelve months to determine their risks and rewards on a valuation basis. Investors are missing an important piece to each of these companies' stories-- each one has a catalyst that is likely to significantly increase cash flows, reduce debt dramatically, and ultimately result in a repricing of shares. These particular speculative stocks have risks worth taking:

ATP Oil and Gas Corporation (ATPG)

ATPG's shares were trading recently at about $7 per share, within its 52 week range between $21.40 to $5.71. Its market capitalization at that level is a little over $400 million. It does not pay a dividend; nor does it have a calculable P/E ratio as it has lost money the preceding 12 months.

ATPG is being buffeted by several factors. First, the price of Texas oil has fallen to roughly $95 per barrel. ATP trades Mars oil, but West Texas Intermediate can be a good proxy. It is expected to be in a trading range of $80 to $100 dollars, or even lower if the dollar continues to strengthen against European currencies due to the ongoing debt crisis caused by Greece's overspending. Second, much of ATPG's proven reserves are in the Gulf of Mexico, in “no drill” areas since 2009. That is BP's fault, given that BP is responsible for the safety hazards that ultimately led to the Deepwater Horizon's demise. Nonetheless, the moratorium ensnared all operators, including, ironically, ATP, which has the best-in-class Titan rig. Third, ATPG had taken on extensive debt to deploy equipment in the past five years, expecting no doubt that it would be able to drill for all of the oil and natural gas in its permitted area.

Other relatively small, independent oil and gas producers seem to be faring far better than ATPG. Forest Oil Corporation (NYSE:FST) and Newfield Exploration Co. (NYSE:NFX) both have operating margins between 35% and 40%. ATPG's operating margin is -11.6%.

Perhaps the November 2012 election will result in a president that will truly reopen the Gulf to drilling, rather than persist in the "permitorium." Perhaps oil prices will spike again sooner rather than later. Either or both of these will be helpful if ATPG is to become profitable sooner rather than later. As each well comes online, ATP slowly but surely can meet its debt obligations with more ease. At this time, it is entirely speculative to suggest the future of ATPG's stock price. While shares could easily triple under a best-case scenario, a worst-case scenario means a middling, but volatile stock price. On a DCF basis and probability analysis, I expect ATPG to double from here.

Ford Motor Company (NYSE:F)

Ford was trading recently a little under $10 per share. Its 52 week range has been from $18.97 to $9.05. It is capitalized at nearly $45 billion, and pays no dividend but that could change in the near future. It has a 12 month trailing P/E of 6.7, and its P/E, based upon the mean analyst expectation for 2011, is nearly the same (6.67).

Ford is an enigma. Over the past ten quarters, the company has posted profits meeting or exceeding expectations. Its products are hits with both the public and automotive press. It has reduced its long term debt so much that according to credit rating agencies it is on the verge of being investment grade after five long years of being regarded as “junk.”

It is expected that some 13.5 million new car and light trucks will be sold in the final tally for 2011 in the United States, the most since 2007. F's market share is much higher than it was in 2007, so it stands to gain greatly from revenue growth.

I believe the future is bright for Ford, more so than for competitors General Motors, Inc (NYSE:GM) or Honda Motors Company, LDT. (NYSE:HMC). Automotive executives have long told us that the auto industry is now focused on a great product. No company has turned over its product line in recent years as thoroughly, or with as much critical acclaim, as Ford. Ford also recently announced a desire to return to paying dividends in 2012.

I cannot say that I expect Ford to double. I expect it to do well, and if one wants to buy an automotive manufacturer, this is the one to which to turn. On a DCF basis, I expect 50% upside from here.

Cisco Systems, Inc. (NASDAQ:CSCO)

Cisco's share price has been around $19, within its 52 week range of $24.60 to $13.30. It has a market capitalization of nearly $100 billion, and a trailing P/E ratio of 15.8, a modest premium to the overall market. It pays a dividend of $0.24 annually, for an effective yield of 1.3%.

Cisco is one of the great survivors of the “dot.com” era. Its business is in the infrastructure of the internet, with routers and switches, where it continues to dominate rivals like Hewlett Packard (NYSE:HPQ), Dell (NASDAQ:DELL) and Juniper (NYSE:JNPR). Its balance sheet is exceptional, with nearly three times the cash on hand as the amount of its long term debt. However, any kind of expectation of its stock price doubling is hardly realistic. In recent years some 25% or more of CSCO's sales have been to local governments. Obviously, that business is under pressure as fiscal 2012 government budgets are tightened. Management also recently adjusted downward its expected revenue growth to 5-7% over the next three years. That same growth is expected of competitors IBM, Inc. (NYSE:IBM) and Oracle Systems Inc. (NYSE:ORCL). While all of these companies, including CSCO, are solid long term choices, CSCO is a solid bet with 25-50% upside in the near-term.

Sirius XM Radio, Inc. (NASDAQ:SIRI)

Sirius has recently been trading at a little under $1.80 per share, near the midpoint of its 52 week range of $2.44 to $1.27. Its market capitalization is $6.5 billion, and its trailing P/E ratio is a heady 40.

Despite, or perhaps due to the current low price, SIRI has gotten positive press. A few weeks ago, Standard & Poor's raised SIRI's credit rating, stating “Sirius' progress in credit quality should be sustainable.” It went to also explain how the improvement in new automobile sales in the United States offered new platforms for new customers.

Perhaps the biggest current risk to SIRI is competition. Pandora Media, Inc. (NYSE:P), free ratio, and ubiquitous MP3 players already exist. And competing platforms from the likes of Google Inc. (NASDAQ:GOOG), Microsoft, Inc.(NASDAQ:MSFT) and Apple, Inc.(NASDAQ:AAPL) may be just around the corner.

SIRI is, in my view, a boom or bust proposition. Might its stock soon double in price? Sure. Might its stock price, which has already absorbed good news without much price change, not go anywhere? Sure. As such, it is most suitable for speculative investors. On a DCF basis and adjusting for the most probable scenarios, SIRI has 25-50% upside in the near-term.

Quepasa Corp (QPSA)

Quepasa trades on the AMEX, and was recently trading at about $3.75 per share, near the low end of its 52 week range of 15.74 to 2.74. It is capitalized at roughly $60 million, does not pay a dividend, and does not have a P/E ratio as it lost money in its most current year with a trailing EPS of -$.40.

As one can tell from its 52 week range, Quepasa, at one time a 1990's “dot.com” star, has recently been valued at three times its current price. However, a low was reached in the third quarter of 2011, and the stock has been trending up since.

Quepasa's main product, quepasa.com, (spanish for "what's up") is the country's largest social networking and gaming site devoted to Hispanic cultures. It has modest long term debt (roughly half the amount of equity), and sooner or later, will become profitable again as the company gets its costs under control and can learn to effectively monetize the site. I hesitate to draw analogies to facebook.com because the per-user value and spending capabilities of QPSA's users are much more limited when compared to facebook.com. However, watch out for potentially huge upside moves as the company's expansion continues in key Central and South American markets.

Source: 5 Speculative Stocks With Huge Upside Potential