3 Stocks Ready to Roar

There are plenty of strategies for picking stock winners, from finding low-P/E stocks to seeking companies selling at a discount to their future cash flows. At the small-cap investment service Motley Fool Hidden Gems, even in this market, analysts are able to stay ahead of the pack by finding undervalued stocks that Wall Street and investors have ignored.

But what if we could whittle down our list of prospects beforehand, to find those whose engines are just getting warmed up?

Using our investor intelligence database at Motley Fool CAPS, I screened for stocks that were marked up by investors before their share prices rose over the past three months. My screen returned just 97 stocks when I ran it, no doubt reflecting the market's turmoil during that time, and included these recent winners:

Stock	CAPS Rating, 5/13/11	CAPS Rating, 8/12/11	Trailing-13-Week Performance
American Railcar Industries	**	***	44.9%
Consolidated Graphics	**	***	39.8%
Applied Micro Circuits	**	***	38.1%

Source: Motley Fool CAPS Screener; trailing performance from Aug. 12 to Nov. 11.

This screen tells us which stocks we should have looked at three months ago, but we'd rather find the stocks that we ought to be looking at today. I went back to the screener and looked for stocks that were just bumped up to three stars or better, sport valuations lower than the market's average, and haven't appreciated by more than 10% in the past month.

Of the 56 stocks the screen returned, here are three that are still attractively priced but that investors think are ready to run today.

Stock	CAPS Rating, 8/12/11	CAPS Rating, 11/11/11	Trailing-4-Week Performance	P/E Ratio
Career Education (Nasdaq: CECO  )	**	***	(52.1%)	3.9
Discover Financial Services (NYSE: DFS  )	**	***	2.7%	6.5
Sunrise Senior Living (NYSE: SRZ  )	**	***	(1.0%)	12.7

Source: Motley Fool CAPS Screener; price return from Oct 14. to Nov 11.

You can run your own version of this screen over on CAPS; just remember that the data's dynamically updated in real time, so your results may vary. That said, let's examine why investors might think these companies will go on to beat the market.

Career Education
For-profit educator Career Education is starting with something of a clean slate after issuing a disastrous earnings report that saw profits slashed. The CEO resigned, and the board was on the lookout for "fresh leadership."

Career Education Corinthian Colleges (Nasdaq: COCO  ) , DeVry, and other profit-making colleges are under the gun for aggressive recruitment practices and their high default rates among former students. Accounting for only 10% of the country's college enrollments, for-profit students make up half of their defaults. Blame it partially on the economy, which is taking its toll on employment everywhere, but low-income students -- who typically enroll at for-profit schools -- will feel the brunt of it more.

CAPS member�EBStroke thinks the pressure from the government will be too much to bear at Career Education and other for-profits: "Career Education Corporation, a major for-profit post-secondary education provider, is facing trouble after it admitted to supplying misleading information on job placement rates. Other for-profit companies are struggling too, under pressure from new federal rules."

Add the stock to the Fool's free�portfolio tracker�to keep track of its progress and see whether can make it to the head of the class.

Discover Financial Services
According to Discover Financial Services' consumer-confidence survey, people feel slightly better about themselves and their situation in October, though they overwhelmingly still believe the economy is poor. As a result, they plan on spending less this holiday season than they did a year ago, which can't be good news for retailers, or the major credit and debit card issuers such as Capital One Finance (NYSE: COF  ) and Visa (NYSE: V  ) .

The better condition of consumers, though, is bolstered by Discover's default and late-payment rates, both of which fell to historic lows last month. It wrote off just 3.26% of its balances, down year over year and sequentially, and well below the all-time high in February 2010. Late payments were 2.48%, also below last year's and last month's numbers, and significantly below the highs in October 2009 as well.

CAPS member viewfromtop believes there's plenty of room for Discover to grow alongside Visa and American Express, which jibes with the feelings of the All-Star members: 87% of those rating the financial-services specialist say it will outperform the broad market averages.

You can provide your own opinion of its prospects on the Discover Financial Services CAPS page and then add the stock to the Fool's free portfolio tracker�to see whether consumers end up changing their spending habits.

Sunrise Senior Living
Despite an 11% revenue drop in the third quarter and a net loss of $0.15 a share -- it earned $0.33 a year ago -- the situation seems to have stabilized at Sunrise Senior Living. The assisted-living home operator also reported an increase in occupancy rates and operating profits, even if only marginally. Occupancy at its senior-living communities rose modestly to just under 88%, while revenue per occupied unit was up 5% from the year ago period.

Valued at less than a quarter of its revenues, Sunrise is cheaper than rivals such as Brookdale Senior Living, though perhaps not offering as much of a discount as Five Star Quality Care (NYSE: FVE  ) , which goes off at just a tenth of its sales.

CAPS member warrenscohn says the demographics of an aging American population make the long-term outlook quite bright for Sunrise: "I too agree that given the demographics of the largest generation ever (baby boomers) due to begin retiring, and moving into assisted facilities in greater numbers (at least once the economy gets better) this company is well positioned to do VERY well. Intangible assets, book value, technical trends, etc, make this a very attractive long term stock buy."

Tell us in the comments section below or on the�Sunrise Senior Living CAPS page whether you think it has the capacity to grow further still, and add it to your watchlist to be notified of its progress.

Three for free
Are these companies still a good value and ready to make their move? I'm heading over to CAPS to mark them to outperform the broader averages. If you agree, join me there, or let us know in the comments section below whether you think these or any other stocks are starting to rev their engines.