Small Caps On The Move - Vonage Holdings And RadioShack

Includes: RSH, VG
by: A.J. Watkinson

One of the more exciting aspects of small cap stock investing is how much and how fast they can move in a single day. At any given moment, any small cap stock can move in double and triple-digit increments. Two movers in recent trading are Vonage Holdings (NYSE:VG), and RadioShack (NYSE:RSH). Let's take a closer look at what's happening with these small cap stocks.

Vonage Holdings (VG)

What: In Friday's trading, shares of Vonage fell $0.08 to $2.42 for a one day decline of 3.2%. The recent drop on Friday came on the back of a 64% jump in average volume (3 month) from 1.38 million to 2.27 million shares.

Who: Vonage is a leading provider of communications services connecting individuals through cloud-connected devices worldwide. VG services roughly 2.4 million subscribers at this time. The company sells their products via the internet as well as through major retailers such as Wal-Mart, Best Buy, Kmart, and Sears.

Why: There are no headlines which may have caused the spike in volume or the drop in share price. However, Vonage's CFO, Barry Rowan, is due to step down after VG releases its next earnings report which is due out on February 11th. In addition, the company was recently granted three new patents.

For the next quarter, the forecast is for VG to post $211 million in revenue with EPS earnings coming in at $0.07. With a trailing P/E of just 1.52x, and a forward P/E of 8.34, shares of Vonage remain relatively inexpensive and are worth taking a closer look at.

RadioShack (RSH)

What: Shares of RSH traded higher by 5.71% in Friday's trading on normal volume to close at $2.22.

Who: RadioShack is a national retailer of mobile technology products and services, as well as products related to personal and home technology and power supply needs. RSH offers consumers wireless phones and other electronic products and services from leading national brands, and major wireless carriers.

Per the company website, RSH employs roughly 34,000 sales associates globally. RadioShack's retail network includes approximately 4,700 company-operated stores in North America, 1,500 wireless phone centers in the U.S., and approximately 1,100 dealer and other outlets worldwide.

Why: There seems to be minimal news out on RadioShack. And unfortunately for current shareholders, the stock is trading just 16% off its 52-week low of $1.90. Analyst's forecasts are for yet another drop in revenue to $4.3 billion in 2013 (down from $4.5 billion last year), an EPS loss of $0.45 a share for this year. This is in addition to a continued decline in sales.

Investors will be hard pressed to find reasons to purchase shares. Even worse, the company has a long-term debt to equity ratio of 0.72x… and a total debt/equity ratio of 1.13x.

Pure speculation and bottom-fishing are the only two reasons to pick up shares of RSH right now.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.