Picking the right small cap stock has its benefits. Strong performances by an "undervalued" or "overvalued" company in the last couple of years would result in long term winners. The stocks I'm going to mention in this article have interesting statistics and might well be of great value to shareholders.
What I've taken into consideration while picking these two stocks are basically profit margins and EPS growth in the last 5 years. These stocks also have a good return on their asset percentages.
Let's get straight at it then:
IRSA Investment and Representation (IRS)
The company was able to fetch a remarkable dividend yield of 8.5%. Experts say that company is set to earn $1.1 per share in the current year and $1.2 in the next. When compared to the past 5 years, the company's annual growth has slowed down this year. In the quarter that ended December 2012, the company managed to earn $0.66 per share, beating the expert estimates of $0.40. To top it all off, the share price has hiked since the earnings were announced.
IRSA is an Argentinian company real estate company and is prominent in this industry. DLF limited, a South American real estate company, is one of its prime competitors. IRSA primarily deals with maintaining large buildings like offices and shopping centers. The key to maintaining growth is ensuring high occupancy rates and monitoring every move of its competitors.
The company reported strong figures in the last three quarters. When compared to the same period a year ago, the company's net income increased by a staggering 94%. As per Argentinian Pesos, the EPS of the company increased from 0.3 to 0.5. The assets of the company increased a million pesos, shareholder's equity increased by 6% and the revenue generated from shopping centers alone increased by 20%. The performance of the company has been solid recently and I won't be surprised if it dominates this segment in the years to come.
Other impressive stats include, a 24% increase in tenant sales and a current occupancy rate of 98.7%. As prompted earlier, maintaining a good occupancy figure alone would help the share price further increase. IRSA trades at $9.34 with a market cap of $526.59 million.
Silvercorp Metals Inc. (SVM)
At present, the company is trading $3.13, a price close its 50 week low of $2.5 with a dividend yield of close to 4%. Over half a decade, the earnings of this company has grown by 26%. The reason for the price dipping is because the estimates have been re-analyzed from 0.54 to 0.24 per share, this was done 3 months back.
Silvercorp Metals is a mining company that primarily deals with gold and silver mining. The company has mines located in China and Canada. It does face tough competition in this industry with Silver Wheaton Corp. (SLW) being one of them.
The key factors for SVM to keep up with competition is to keep up with the overall demand of metals and commodity pricing. A drop in ether production or commodity pricing could affect the company badly. The success of the company is primarily driven by these key factors, outperforming its competition would not matter as much.
There was enough and more to take away from the company's third quarter results which were out in February. Adjusted EPS for this quarter was $0.09/share, unadjusted EPS was at $0.03/share (last year it was at $0.12/share). The reason for these figures was because of the dip in total sales as compared to last year. Production of metals decreased last year and this in turn led to a smaller sales figure.
I believe that the time for the company to show solid performance is now. Why? The company managed to mine 237,000 tons of ore, which is the company's best figure to date. This mine has managed to attain the highest silver sales figure since the third quarter of last year.
SVM was burdened with high production costs this year, which indirectly led to revenue decreasing from $193 million to $148 million. The company has been going through a tough phase last year, but things should be back on track with the mine in China giving the company happy news.
Both Silvercorp Metals and IRSA investments are among the few small caps that would do better than last year. SVM has to ensure that it has a good grasp on two key factors, which are commodity prices and demand. Maintaining high occupancy rates and keeping up with the competition in Argentina would play well for IRSA.
The best time to jump on the Silvercorp wagon is now. The company is at its 50 week low and the company is producing more ore. Considering that the previous year might have taught the company to manage its production costs better, all the company has to do is to make sure it can achieve the sales figures it achieved in 2011. That alone would be good enough to lift shares off their 50 week lows.
IRSA is delivering pretty good numbers at this very moment. The major reason of this company to excel right now is the developing middle class segment in Argentina. This company is worth much more, impressive tenant sales and shopping center revenue alone should be a good enough reason for its ongoing success.