(MONEY Magazine) – Question: How many analysts does it take to research a stock? The answer for shareholders in a promising company: the more the merrier. When a horde of influential Wall Street analysts descend on a stock, putting out multiple buy recommendations, demand for the shares increases and the price runs up. This means profits for the lucky investors who got there first.

The numbers back this up. According to IBES, a firm that tracks analysts' projections for company earnings, stocks with more analyst coverage tend to have higher valuations. For example, of the 1,015 technology stocks that IBES follows, those with four or more analysts covering them have an average price/earnings ratio on estimated 1998 earnings of 21.4. Those with three or fewer have an average multiple of 18.6, or 13% less.

That's why one of the time-tested strategies for savvy investors is to find treasures that few analysts are following now but are on the edge of being discovered. Therein lies risk, however: Some underfollowed stocks deserve to be. The trick is to find those companies that are unjustly ignored. To come up with a few leads, we asked IBES to screen its database for companies covered by three or fewer analysts from major Wall Street houses. Then to make sure these outfits deserved attention, we looked for those with a market capitalization of $250 million or greater, projected annual earnings growth of 15% or more, and P/E ratios of 30 or less. We vetted the survivors with analysts who currently follow the companies and portfolio managers who invest in them to find three companies most likely to attract Wall Street's attention. They are profiled below in order of their potential returns.

--Avondale Industries (ticker symbol AVDL; recently traded on Nasdaq at $29; no yield). The reason this $612 million builder of military and commercial ships has been ignored in recent years is simple. "The cold war is over," says Peter Ricchiuti, research director of the Burkenroad Reports program, which analyzes underfollowed companies. But business is about to improve for the Avondale, La. firm. Last year, the shipbuilder secured the only new order for tankers in 15 years, two crude-oil vessels for Arco Marine costing $322 million. What's more, the U.S. Navy recently selected Avondale as part of a team to build 12 assault ships over the next 10 years, an assignment that could mean $4 billion in revenues to the company. Lazard Freres analyst James Winchester estimates that the two sources of new business will produce earnings increases of 14% in 1998, enabling the stock to steam to $40 within 12 to 18 months for a 38% return.

--Helen of Troy (HELE; Nasdaq, $14.75; no yield). Although everyone knows whose face launched a thousand ships, most investors are unaware of Helen's namesake stock, a $232 million designer, marketer and distributor of hair-care appliances and other beauty products. In business for 29 years, the El Paso company is licensed to sell its hair dryers, brushes and combs under names like Revlon, Vidal Sassoon and Dr. Scholl's through such big-name retailers as Wal-Mart and K Mart. Kyle Kavanaugh, an analyst with Schroder & Co., thinks those licenses could be worth an additional $100 million in annual revenues over the next several years. For example, Revlon has recently added brushes, combs, women's shavers and artificial nails to an original licensing agreement that included only hair-care appliances. As a result, Elaine Rees, senior analyst at the Dreyfus Funds, which own 80,000 HELE shares, predicts both 25% annual earnings growth (up from 19% over the past five years) and a price of $20 for the stock within a year, for a 36% return.

--Pittway "A" Shares (PRYA; NYSE, $67.50; 0.5%). Sometimes a stock doesn't get the attention it deserves because analysts aren't sure how to value the company's businesses. That's apparently the case for $1.1 billion Pittway, a hodgepodge of alarm and security products and business and trade magazines. But in December, the company took a step toward clarifying itself when it announced plans to spin off its publishing division, Penton Publishing, to shareholders in the second quarter of 1998. Left over will be the largest manufacturer and distributor in the alarm industry. Owing to increased public concern about crime, analyst Scott Ciccarelli of Gerard Klauer Mattison thinks that division alone can produce 20% annual earnings increases over the next three years. Investors who purchase Pittway before the spin-off will also receive Penton Publishing shares, giving investors two stocks that Jonathan Coleman, co-manager of the $1.3 billion Janus Venture fund, believes will be worth a total of $82 within a year, or 22% more than today's price.