After rummaging through the latest earnings reports, I have found five companies that have positive catalysts for the short-term and also look good for the long-term. What these companies have in common is that they have either met or beat their earnings estimates last quarter and have raised their earnings estimates for the current fiscal year.
The positive earnings revisions that these companies are providing typically result in higher stock prices in the near term. The reason for this is that management makes estimates that they think are realistically attainable. It is not uncommon for these revised estimates to be exceeded; therefore an upward earnings revision usually drives stock prices higher in the short-term, until the next catalyst.
As for the long-term, the companies that I highlight in this article look like good investments for the next five years or more. So, the stocks are likely to rise in the short-term with a good possibility of rising in the long-term.
Brown Shoe Company (BWS) is a $707 million small-cap operator of retail and wholesale footwear businesses. The company operates retail stores under the Famous Footwear, Naturalizer, Via Spiga, Dr. Scholls, and Sam Edelman names. The company also runs a number of websites that sell various shoes.
The stock is undervalued with a forward PE ratio of 13.16, a PEG of 1.07, and a price to book ratio of 1.64. The company beat earnings estimates last quarter by 30% (actual EPS of $0.60 vs. an estimate of $0.46). The company is now estimating EPS of $1.06 - $1.10 for FY12 vs. previous estimates of $0.85 - $0.95. Brown Shoe pays a dividend of 1.6% and is expected to grow earnings annually at 15% for the next five years. This growth should be enough to allow the stock price to double in five years.
The J.M Smucker Company (SJM) is a $9.4 billion large-cap manufacturer of food products. It makes much more than the brand that bears its name. Here is a sample of brands that the company also offers: Folgers, Millstone, Jif, Hungry Jack, Uncrustables, Pillsbury, Crisco, Borden, Carnation, and Café Bustelo.
Smuckers has a fair valuation with a forward PE ratio 15.23, a PEG of 2.00, and a price to book ratio of 1.79. The company matched its earnings estimates for last quarter with an EPS of $1.45. It has increased its earnings per share guidance for FY13 from $5.00 - $5.10 to the new range of $5.12 - $5.22.
The company pays a dividend of 2.5% and is expected to grow earnings annually at 8.13% for the next five years. If dividends are reinvested, a $10,000 investment in SJM could reasonably grow to be worth over $16,000 in five years.
Hibbett Sports (HIBB) is a $1.43 billion small-cap operator of sporting goods stores in small to mid-sized markets. As of October 27, 2012, the company operated 848 stores in 26 states. The stores are primarily located in the South, Mid-Atlantic and Midwestern regions of the U.S.
Hibbett's stock looks fairly valued with a forward PE ratio of 18.11, a PEG of 1.27, and a price to book ratio of 6.14. The company beat its earnings estimates last quarter by 4.4%. Actual EPS was $0.71 for the quarter vs. an estimate of $0.68. Hibbett raised its estimated EPS for FY13 from $2.57 - $2.67 to $2.66 - $2.71.
The company is expected to grow earnings annually at 15.67% for the next five years. This growth should be enough to allow the stock price to double in the next five years.
Multimedia Games (MGAM) is a $410 million small-cap designer and manufacturer of Class II gaming machines, video lottery terminals and related equipment. It makes 3 and 5-reel slot machines; back-office accounting, and slot management systems.
The stock looks fairly valued with a forward PE ratio of 18.35, a PEG of 0.86, and a price to book ratio of 2.59. MGAM achieved an EPS of $0.30 last quarter vs. an estimate of $0.21. The company upgraded its earnings estimates for FY13 from a previous range of $163 million - $170 million to a revised range of $165.5 million - $170.2 million.
MGAM is expected to grow earnings annually at 25% for the next five years. This growth should allow the current stock price of $14.50 to rise to over $40 in five years.
PetSmart (PETM) is a $7.44 billion large-cap retailer of pets and pet-related products and services. The company operates about 1,249 stores in the United States, Canada, and Puerto Rico. In addition to selling actual pets, PetSmart carries over 10,000 pet-related products.
PetSmart is currently fairly valued with a forward PE ratio of 17.62, a PEG of 1.06, and a price to book ratio of 6.41. The company exceeded its earnings estimates by 19% last quarter with an actual EPS of $0.75 vs. an estimate of $0.63. It raised its earnings estimates for the fiscal year from an EPS range of $3.30 - $3.40 to a higher range of $3.47 - $3.51.
The company pays a dividend of 1% and is expected to grow earnings annually at 18.39% for the next five years. This growth should allow the current stock price of $69 to grow to be worth about $160 in five years.