Most investors quickly judge stocks by their appearance.

If we see a stock hurtling to the ground, we don’t pay it much attention.  We don’t bother researching what may have happened.  We just whistle past the graveyard.

But that’s the worst thing an investor can do.

Sometimes, what may appear ugly on the outside, offers beauty under the hood.

In fact, we’ve proven that for the last 37 years in The Cheap Investor.

In early 2017, The Container Store Group (TCS) had just fallen from $8.34 to less than $4 a share on earnings results. Results weren't quite as good as many had hoped, and continued weakness during the key holiday period resulted in disappointment among those wanting to see growth.

No one wanted to touch it.  It had one of the ugliest charts on the market.

But after looking under the hood, we found opportunity at $4.21.

At that time, earnings weren’t up to par quarter over quarter.  However, it had $18 million in cash, or 38 cents a share with a book value of $4.39.

That meant there was value, and it was selling for a very attractive low price.

This was an opportunity. So, we recommended the stock at $4.21 in the March 2017 issue of The Cheap Investor and waited for others to wake up to the potential.  Recently, the stock hit a high of $12.42, a potential win of 195%.

Here’s why Investors are Excited Now

Container Store’s first quarter numbers were incredible.

Revenue was up 7% year over year to $195.8 million.  It may not be profitable, but its adjusted net loss did narrow to $4 million. While that resulted in an adjusted net loss of eight cents a share, it was still better than many had forecast.

In addition, same-store sales were up 4.7%.  That’s a significant amount.

Gross margins improved two percentage points to 58.6%, as well.

And CEO Melissa Reiff seems happy.

"We are very pleased that our strong fourth quarter momentum carried through to the first quarter of fiscal 2018," Reiff said, "with improving trends in our Custom Closets business as well as ongoing positive comparable store sales contribution from our other product categories.  We are encouraged by our progress and excited about the opportunities that lie ahead."

In short, while you may be inclined to judge on first appearance, stop and take a look at what’s really happening.  You could find a great stock that most investors are missing.

The Cheap Investor highlights similar opportunities in the newly-posted September 2018 issue.