3 Stocks You’ve Never Heard Of (But Need to Watch)

If you're looking for new investment ideas, we've got a great concept for you. John is going to go through three stocks today that I don't know and haven't researched what he thinks might be compelling investment ideas. So, John, what's first today? >> Yeah, first on the table today is form factor. This is ticker symbol FRM. Is it fair to say that you're not a big fan of memory stocks? >> I think that's fair. I think it's cyclical industry. I don't want to be buying at the top of the cycle. Ironically, low PE mult multiples are usually bad for memory stocks. >> And so maybe the risk is you're worried about commoditization in the memory space bringing those profit margins down. >> Now, is it fair to say though that you do see the case that we might need more memory in the future and so volume might be higher in the future? >> Yeah, that's fair. >> Okay. So, if you see a case for higher volume, but you're worried about the memory prices themselves, then I have a stock for you that can allow you to profit off the higher volume without worrying about the commoditization. That company here, as mentioned, is form factor. Now, what form factor does is it makes probe cards. probe cards. Basically, as the memory is getting made, they need to have these little electrical connectors touch down and make sure that they work before they go out of the factory to the customer. And what we're talking about really, really small things that it is testing. And so all of these probe cards have to be custommade. So what this does is form factor makes these probe cards. It is going to be the company running those probe cards throughout that generation of memory, but also works with its customers because it's having to work ahead several generations getting into the design phase to make sure that when production is ramped up, it already has the probe cards ready to go. Okay, so let's go through some of the numbers here and we can pull these up. Total revenue since 2017 component growth rate is only 6%. So that's not that crazy. Uh but there has been a nice jump over the past six months to a year. That would indicate exactly what you're talking about. You're kind of getting ahead of things. Profit margin has gone up a little bit over that same time as well. Valuation is a little bit steep though. Uh enterprise value to sales is almost eight and the forward price earnings multiple is 33. is the idea here though that the volume is going to increase more than enough because remember even in the most I think the most recent quarter Micron said hey we didn't change our volume at all like so the the capacity additions that we're talking about bringing online in memory are not going to be hitting until 2027 at the earliest 2028 2029 that's when you would really see this benefit is they're kind of doing that groundwork right now and then the future growth is going to be the driver of the business. So maybe paying 30 times earnings isn't that big a deal if you're have an opportunity to double, triple, quadruple profits over the next few years. >> Yeah. And that's exactly what this is all about. The market is looking ahead to the higher volume down the line and pricing that in. Now you know one of the in fact not one of the the top customer for form factor is SKH and SKH recently partnering with Nvidia. They're integrating things into the design phase. SKH Highix recently having its own US IPO raising money. It needs to increase production and so that does point ahead to good times for form factor. Another thing I'll point out here is it's not just memory. There are other ways that probe cards are used and and one intriguing area of optionality is quantum computing. CQITS also need probe cards and form factor is getting into many test designs here for quantum computing companies. Now, here's the wild card here. If all of a sudden a quantum computer company has a breakthrough and we need to start scaling up rapidly going into more than just testing, more than just experimental, now we're actually into production mode. Formfactor is the one who already has the design of the probe cards for the thing that is ramping up. So, it could very quickly turn into a tailwind before anyone's realized what's happening. >> Right. I like that. I like that. and and we'll we'll rank these three, but if you have thoughts on form factor, leave those in in the comments section below. Curious to see what everyone thinks about these three stocks that you may not have ever heard of before. Let's go to stock number two. Crito technology. What is a credo technology? >> Uh it's one of the highest growth companies in the world right now. To just kind of put some numbers into perspective, it just finished its fiscal 26. Fiscal 2026 revenue was three times or triple what fiscal 2025 revenue was. In fact, revenue in the fourth quarter of fiscal 2026 was larger than all of fiscal 2025 combined. So, it is growing really fast. What it does is it provides these zeroflap active electric cables. And that sounds very complicated. Let's break it down. So, GPUs, they need to be connected to each other and clusters. um one to one there's just bigger and more connectivity between GPUs to make AI happen with zero flap. What do we mean? If there's a flap in a connection, basically the connection is temporarily dropped. Even if it's just a split-second drop, the connection can be lost. And what that does is for some AI applications, that means it's got to start over. Even just a momentary little bloop. And that is a big problem for cloud companies for their customers, especially NeoClouds that are renting by the hour. If all of a sudden their customers have to start over, they're not happy. So a zero flap solution is something that uh they want. Credo says it's uh connections are a thousand times more reliable than the competition and that could be a big deal. >> Let's talk about the price about of this company as well. similar price to earnings multiple is about 37. Uh enterprise value to sales on a forward basis is about 17. So it does seem like the market's got pretty high expectations for this company. Is this is there any risk here that they get designed out if you will in the future? I know that that's kind of the point where we're at with a a lot of these uh AI designs. So you would this would be a worry if you're a memory maker for example is you yeah we're using a ton of memory on the current generation of chips but if the prices are going to go up 3 400% we're going to try to design that a little bit differently in the future. Is that a concern for a company like this? Obviously a ton of tailwinds today but is it possible that growth slows significantly in the future? >> Well there's multiple competitive angles here. I mean there are multiple different approaches to connecting GPUs together. It seems like the passive electrical cable that's kind of dying out. This is the active one. So, there's a chip on either end of the copper cable to make sure that not as much of the signal is lost, that there's higher fidelity and speed, lower latency, less power, right? Um there's also optical solutions. Um now, Credo does have optical things in its uh portfolio as well, but yes, competing with optical companies for sure. And then in its own kind of more core areas, I mean, Broadcom would be like one of the big competitors here. So, yeah, it's definitely possible. Now, you look at though what it expects for this coming year. It just tripled revenue, expecting another 80% growth this year. That would take you to about 2.5 billion in revenue in the coming year. Let's just assume that it trails off to 30% growth in the subsequent three years. Now you're at a $5 billion company. This is a fabulous semiconductor company. Margins already pushing north. Maybe it gets to 50% margins. I don't think that that's crazy to think. So now you got 2.5 billion in profits. What if it trades at 25x that? That's a 62 billion company. That's about 50% upside from where it trades today over the next four years. So I think there is a reasonable case here that it hasn't run too far. And even decelerating growth gets it to a good place. Yeah, it it is fascinating how many of these huge companies big I mean a $6 billion company um still a lot of runway ahead as this AI buildout takes place probably um kind of in their early phase of growth. I'm a little bit worried about that price but we'll get to my final thoughts in just a moment because you have one more stock. What is that one? >> This one is way off the trail completely. Let me ask you Travis, have you hit a pothole with your car recently? >> I'm sure I have. Yes. Well, it wouldn't be uncommon because right now many people give America's roadways an F as far as where they're at in being maintained. It is a problem. And you know what? It's even a bigger problem in some areas of the Southeast because what's happening in the Southeast or the Sunb Belt is that there's so much population shift that so many people are moving to the southeast that roads weren't designed to handle this amount of traffic. Roads need to be widened. uh they need uh maintenance on a faster schedule now because there's just so much more traffic that plays to construction partner strengths and this is ticker symbol R O A D road. >> I love love that ticker symbol by the way. >> Yeah, very memorable ticker symbol. So what does construction partners have going for it? Well, it does pave roads. I mean that's kind of what it does. It runs these crews. They have these huge road projects from the design all the way to putting that final blacktop on top. But you think about a business like this, there are competitive advantages to having vertical integration. So you basically you have the supplies. You you can mix the asphalt in a plant somewhere, but that can't be transported very far before it starts cooling down. There's a limit to how far you want to be transporting that from a weight, but also that especially that hot asphalt mix that needs to stay hot from where it's mixed all the way to the the job site. So, it actually has vertical integration in the business. It's been acquiring these hot asphalt mix companies. I mean, these aren't going for, you know, 30 time sales. You can get these for fairly attractive prices, and it makes its business better. it is able to lock up more business because it it has the whole ecosystem where the roads need to be paved. >> So, is it fair to say that this would be something of a roll up in the road business? >> 100%. And the CEO or the formation of the company actually has more private equity roots um kind of a operator coming together with somebody with investment banking experience. They kind of combine the two to create this company and they do they roll up a lot of money goes every single year to acquiring these small mom and pop businesses. They also have acquired parts of the businesses from like even Vulcan Materials here recently. I believe it was in the Houston market. They acquired some of their plants to better serve their road paving uh objectives in that in that Texas market. >> I do like the tailwinds. I like the the story of the tailwinds here. The rollup market. you maybe have a little bit of an expansion in margins because those margins are not going to be super high just looking at those quickly. 4.1% net margin even the IBIT margin about 13.7%. So potentially if you are able to get some efficiencies there but that is still a pretty competitive market. So you're you're you're kind of playing the macro there. Again you're you're right in the same zone here with all the the price for all these companies on a forward basis about third earnings is where the stock is trading for. Okay. I want to give my rankings of these companies. I'm just going off of John John's pitch here uh and the information that I've I've shown on the screen throughout this video, but the one that has my most attention that I got to dig into a little bit more is form factor. Maybe it's something about the ease of understanding that testing equipment, and I know that's one of those kind of forgotten businesses. It's it's difficult to develop these products. They're really precision products. I mean, I've seen this. I knew somebody who owned a spring measurement company and just did a phenomenal business because like who's going to come in and develop another spring measurement device. It's just it's it's a niche product. So you can have a really good business and then you actually grow up with your customers like you're saying. So as we have more expansion in the memory market, they're just going to ride right along with that. That's a great core thesis to me. The optionality in quantum computing that sounds really compelling to me. So, where does that one rank? If you have to put these three, where does that rank in your three? >> That is a really good question. Um, maybe I should answer this uh with my wallet. I own shares of Credo and I own shares of construction partners, but my position in Credo is bigger than Construction Partners and I currently do not have a position in form factor, even though I probably like that one first of the three. So, I don't know. Nobody's completely consistent in their in their logic, I guess. Yeah, sometimes you don't you don't pull the trigger on buying stocks, too. Number two, I got to go with Construction Partners just because that maybe I can wrap my head around that business a little bit more. Again, I like the macro. I'd love to get this at a much better price. This is one of these companies that I would love to get it at half the multiple that it's trading for right now. So, maybe it's just a watch list company at this point. Maybe not even building some sort of starter position. It's just one, hey, this this should be on my radar because the tailwinds are not one year, two-year tailwinds like we maybe have in the memory market. It's generational tailwinds, if you will. So that means credo technology goes to number three. Sorry again, very complicated solution, complicated product. Maybe I get this completely wrong, but it this almost seems like one of those areas that unless you're really really deep into that and understand are you going to be in the next generation of GPUs? Are you going to have tailwinds from AMD's growth or you know all of these things are are are really complex and I just don't feel like I have a area of expertise in that. So maybe that pushes it down a little bit. But definitely one of those compelling products that triple triple digit growth definitely something you want to see as an investor. All right, let us know what you think about those three stocks, Formfactor, Crito Technology, and Construction Partners. How would you rank those three? And have have you looked at them before? Love to hear your comments in the comment section below. Don't forget to follow the Mly Fools channel here on YouTube. Thanks for watching everybody. See you here next time.