3 Top Stocks That Aren't on Wall Street's Radar

Wall Street analysts typically cover a multitude of stocks, giving their opinion on whether they are a buy or sell. The most popular ones, however, tend to get the most coverage. Because of that, several good companies often slip through the cracks.

Three stocks that don't seem to have caught Wall Street's attention yet are online bank Ally Financial (NYSE: ALLY), pharmaceutical company UroGen Pharma (NASDAQ: URGN), and midstream MLP Noble Midstream Partners (NYSE: NBLX). Here's why our contributors don't want you to miss them, too.

Quietly marching toward important milestones

Maxx Chatsko (UroGen Pharma): It's not developing a portfolio of headline-grabbing gene therapies, and analysts don't expect its lead drug candidate to eclipse $1 billion in peak annual sales, but UroGen Pharma might just be onto something worth paying attention to.

The urology-focused pharmaceutical company is developing a portfolio of drugs around its reverse thermal hydrogel (RTGel) technology. The approach is pretty simple: Therapeutic doses of drugs are embedded into gels that remain in a liquid-like state at room temperature, but become more viscous when warmed by the human body. That allows urologists to deliver drugs into the urothelial tract and bladder, which are often difficult to reach, with standard outpatient procedures using a catheter. It could transform the way several urologic cancers are treated and significantly improve outcomes, including the rate of recurrence or the need to surgically remove kidneys.

UroGen Pharma's most advanced drug candidate, UGN-101, appears likely to earn marketing approval from the U.S. Food and Drug Administration as the first drug approved to treat low-grade upper tract urothelial cancer (LG UTUC). The experimental therapy triggered a complete response in 59% of patients in a phase 3 trial, and 89% remained disease-free at the six-month mark. The company is preparing for potential approval and market launch in early 2020. Analysts expect peak annual sales of at least $500 million.

While impressive in its own right, UGN-101 might just be the beginning. UroGen Pharma expects to report phase 2 data for its second-most-advanced drug candidate in 2019 and could initiate clinical trials for its third drug candidate. RTGel technology is also being explored in partnerships with larger pharmaceutical peers. Allergan is studying a formulation of Botox to treat overactive bladder, while Janssen is developing proof-of-concept for an undisclosed therapeutic area.

Given the potential to deliver enormous value to patients by altering the standard of care, the breadth of potential applications for RTGel, and the current market cap of just $800 million, investors might want to keep an eye on UroGen Pharma.

A cheap online bank

Tim Green (Ally Financial): Ally Financial, which was formerly the finance arm of General Motors prior to the financial crisis, is now an online bank that has most of its assets tied up in auto loans. While that may turn out to be a problem during a severe recession, there's still a lot to like about this under-followed company.

First, the online bank has had no problem attracting deposits. Ally offers high savings rates, which has drawn in customers sick of the rock-bottom rates offered at bigger banks. Retail deposits now total $95.4 billion, up from just $59.0 billion three years ago.

Second, the valuation is pessimistic, to say the least. On average, analysts expect Ally to produce adjusted earnings of $3.62 this year, putting the price-to-earnings ratio at just 8.2. And Ally trades for less than its tangible book value, despite that value rising by nearly 25% since the beginning of 2016.

I'll admit that I'm no expert on the banking industry, so I may be missing something here. As fellow Fool Jordan Wathen points out, online banks may not have the advantages they appear to have in a higher interest rate environment. And while Ally's retail auto net charge-off and delinquency rates have remained largely steady over the past few years, that steadiness is unlikely to last forever.

I think Ally's depressed valuation more than compensates investors for the risks, and that's why it's a small piece of my portfolio. For value investors, it's worth taking a look.

A high-yield gem

Matt DiLallo (Noble Midstream Partners): Fast-growing MLP Noble Midstream Partners seems to be flying under Wall Street's radar. While the midstream company has delivered exceptional results over the past year -- including growing cash flow by 13% -- the MLP's unit price has tumbled more than 35%. Because of that, investors who are paying attention can pick up what looks like an attractive opportunity.

One of the benefits of Noble Midstream's sell-off in the past year is that it has pushed the company's yield up to an eye-catching 7.6%. That payout is on exceptionally solid ground. That's because the MLP currently covers it with cash flow by a very comfortable 1.9 times. Noble Midstream further supports that payout with a solid balance sheet, backed by a low-leverage ratio.

That strong financial profile gives the company the flexibility to invest in high-return expansion projects. Noble Midstream currently has enough opportunities lined up to provide it with the fuel to grow its already high-yielding distribution at a 20% compound annual rate through 2022.

Another benefit of Noble Midstream's sell-off in the past year is that it has driven the company's valuation down to an attractive level. The MLP currently has a market value of about $1.3 billion. However, with Noble Midstream on track to produce $197.5 million in cash flow this year at the midpoint of its guidance range, it implies that the MLP sells for just 6.6 times cash flow. That's an absurdly cheap valuation for a midstream company where most trade at a mid-teens multiple of their cash flow.

Add it all up and Noble Midstream has the compelling blend of yield, growth, and value that tends to fuel big-time outperformance once Wall Street "discovers" a company.

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Matthew DiLallo has no position in any of the stocks mentioned. Maxx Chatsko has no position in any of the stocks mentioned. Timothy Green owns shares of Ally Financial and General Motors. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.