Despite solid performance from the internet-brokerage space, shares of TradeStation (NASDAQ: TRAD) have struggled over the last six months. TradeStation is a very unique broker because it offers traders the ability to automate and backtest their trading strategies.

TradeStation's stock is undervalued even though it has strong growth potential, positioning in a hot sector, and a new product that has the potential to serve as a catalyst in the next few quarters.

TradeStation currently trades for 17x earnings -- a multiple that is currently below the industry average of 22x earnings, the multiple of both TD Ameritrade (NASDAQ: AMTD) and Charles Schwab (NASDAQ: SCHW). While skeptics point to the lowly multiple of 15x earnings on ETrade (NASDAQ: ETFC), I counter their arguments with the simple fact that the company's balance sheet is loaded with debt.

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• Friedman Billings believes TradeStation's (NASDAQ: TRAD) unique platform differentiates it from the competition and gives it a sustained advantage, starting shares with an Outperform.

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