Absolutely, it's very rare for an undergrad to be on a paper. But that's what makes it such a strong signal: it shows they had the grit and maturity to contribute to a research effort to completion, in a team with people more experienced than they are. In an interview, it gives them something non-trivial to talk about and be proud of. That's very likely a strong junior candidate.
There are a ton of things you might look at for a newly graduated undergrad beyond grades: research and other academic projects, sports teams, editor on a newspaper, etc.
