Every so often, even in a bear market, you find a small, growing company trading way below its actual value. A great company somehow slips through the cracks and not a soul realizes its value and potential. Luckily, Bulletin Board Elite ’s Greg Guenthner is there to scoop it right up.

Even during bear markets, it is rare to find a small, growing company trading at a hefty discount to its true value. When we’re screening penny stocks for inclusion in the Bulletin Board Elite portfolio, a low P/E ratio usually sets off alarms. “Why is this stock so cheap?” we sometimes ask. Something must be terribly wrong…

That’s usually the case. The company’s P/E for the trailing 12 months might be propped up by an unusually strong quarter or a one-time payment. Or the company could have unexpectedly announced flat growth for the upcoming year. After all, who wants to pay a high multiple for zero growth? Not I…

Every so often, there’s a break in this trend. A great company somehow slips through the cracks and not a soul realizes its value and potential.

We believe we have found exactly this opportunity. In less than a year, this microcap could very well be sitting on a major exchange with a new booming business segment operating in one of the fastest growing nations in the world.

More on this in a minute… First, we have to show you just how explosive this new retail growth can be…

Decades ago, China’s goal was a chicken in every pot. Wealth was measured by how well you could feed your family from a small plot of land. That was then, as the saying goes. Today’s China is all about consumption.

China’s rapid growth isn’t a well-kept investment secret. There’s money to be made in Asia, and investors are clamoring to get into this lucrative market.

As China’s working and middle classes grow, so too does the country’s purchasing power. Naturally, retail sales have experienced a dramatic surge. Domestic retail sales skyrocketed 20.2% for the first two months of 2008, to more than 1.74 trillion yuan, or about $248.1 billion. That’s more than 5% higher than last year.

While retail sales include food – which has been heavily affected by inflation – and wholesale goods, these aren’t the only statistics padding the numbers. Clothing sales are up 24%. Daily consumer goods are up more than 21%. Household appliance sales are up almost 19%.

One of the true hallmarks of middle-class growth is the sale of these nonessential and luxury items. Even the poorest working members of a society will spend money on food staples. However, the working poor, especially in nations with less-developed economies, won’t be dropping big chunks of their paychecks at the GAP…

Now that China’s economy is well into its adolescence, middle-class spending will continue to grow. And one small garment manufacturer is preparing to ride this “clothing boom” all the way to the bank.

Our next play isn’t even a blip on Wall Street’s radar. It’s cheap, growing and expanding in a predictable, simple industry. The company even has aspirations of landing on a major exchange (sooner, rather than later).

We can’t name this company here, but we can tell you a little about it. It is a garment manufacturer. The company makes brand-name clothing for companies all over the world. It doesn’t get any simpler than that…

This company operates clothing manufacturing facilities in China. From there, it ships its finished products to Europe, Japan and the United States. But this year, China is more than just a manufacturing location. It’s a country full of eager new customers.

In 2007, they shipped a majority of its products to Europe. Twenty-one percent then went to the U.S. and 16% were sent to Japan. Only about 6.5% of the company’s goods were sold in China. And while China was its smallest customer, its sales to the Asian nation grew 47% last year.

Now, with a renewed focus on this high-growth market, this company will attempt to add even more value to its shares by pursuing even more business in China, as well as launching its own Chinese clothing brand. This planned growth, along with its limited exposure to the U.S. retail market, makes this a “safe” growth play during times of economic uncertainty and a falling dollar on this side of the Pacific.

Oh, and did we mention this stock is dirt-cheap?

You can buy shares today for roughly $3.20 per share. And with that price come great fundamentals and growth. This company’s P/E is a jaw-dropping 5. That’s right – this company is quite profitable, reporting earnings of 84 cents per share for all of 2007.

These earnings are no anomaly…this is a legitimately profitable company on the brink of launching new – and potentially very lucrative – operations in China. Its revenue is almost six times what it was in 2005. Its profit margins are strong and stable, and its return on equity is an impressive 45%. This company really is one of the best-kept secrets on the bulletin boards. And 2008 is set to be an even more lucrative year.

The company is developing its own brand and supply chain connections for the Chinese market this year through its new subsidiary New-Tailun. This move will surely turn heads once it gets off the ground…

They have two important goals in mind for this year: to expand its China operations (which we mentioned above) and to launch its stock on a major exchange.

It’s no secret that the company is looking at a move. They filed an application for listing on the Amex this past week. And just last week, the company added an independent director to bring its board in compliance with SEC rules. If and when this company moves to the Amex, its current valuation will not last long at all.

Right now, we value this stock at roughly $5 per share, using a model that assumes completely stagnant growth… That’s a cool 40%-plus from where it’s sitting today. And that’s only if growth slows to a halt this year…something we doubt will happen anytime soon, given this experienced company’s expansion plans.

Sure, this mystery company’s valuation is compelling. So is the growth story – over the past 10 years, the company has grown annual sales at a steady 30% clip. And China’s low labor costs and even lower tax rates for exports sweeten the deal. But there’s one key factor that makes this a great investment: management.

No, we’re not talking about experience or vision or any other intangible asset that a great management team might bring to the table. Instead, this management team is heavily invested in the company’s stock. Management owns a whopping 47% of the company’s common stock. This is the only way for management to make its fortunes with this company. Salary compensation is very low – the CEO receives only about $20,000 per year.

So naturally, management will do everything in its power to increase the value of those shares. And when it wins big, you will win with it…

Regards,

Greg Guenthner
for The Daily Reckoning

P.S. You can find out all about this company (including its name), and others that are flying just below the radar, poised to jump onto a major exchange. But the interesting thing is – these “jumper” stocks bank the vast bulk of their profits before making the transition to a major exchange.

We can allow just a few of you to cash in on a new system designed and managed to pinpoint these kinds of “pre-jump” gains – but only those who hurry! This heavily discounted invitation will expire at midnight tomorrow – Thursday, April 3. Act now…

Editor’s Note: Greg Guenthner has dedicated himself fully to investigating the opportunities available to investors in the oft-overlooked bulletin board companies. In other words, he looks at the whole story. It’s telling too, because not one of the companies he has in his recently released Bulletin Board Elite portfolio is down. Companies traded in this arena stand to make huge gains when they list on the major exchanges.