- The stock is trying to stage a rally at midday Tuesday after three straight days of deep declines.
- It is too early to get back in the momentum names, but some small caps are starting to look more attractive after recent pull backs.
- Profiled below are two small cap tech stocks that look appealing on a longer term basis given their growth prospects.
The market is trying to stage somewhat of a rally at midday Tuesday after three days of deep declines. Although I believe it is too early to go back to some of the high momentum names that have cratered recently after leading the rally in 2013 like Tesla Motors (NASDAQ:TSLA); some areas that have been taking hits in the decline recently look more attractive.
Small caps have suffered declines as well with the Russell 2000 down some 6% from its highs in March. I have seen some growth plays that are starting to get attractively priced on a longer term basis. This is especially true in small cap technology. Here are two small cap tech plays that look appealing given their growth prospects.
Web.com Group, Inc. (NASDAQ:WWWW) provides Internet services to small businesses in North America, South America, and the United Kingdom. The company offers a range of Web services and products that enable small businesses to establish, maintain, promote, and optimize their online presence. The company has a market capitalization just north of $1.5B. The shares trade at ~$31 a share and the shares have declined some 15% over the last month on the NASDAQ and Russell 2000 sell-off.
Craig-Hollum upgraded the shares today from "Hold" to "Buy". The analyst firm has a $40 a share price target on WWWW. This is close in line to the median price target of $39 a share the 11 analysts that cover the company have on the stock. The company is seeing consistent revenue growth of 10% to 12% annually.
This is translating nicely into earnings gains. Web.com earned just over $2 a share in FY2013. The consensus sees earnings of ~$2.50 a share in FY2014 and almost $3 a share in FY2015. The stock is not expensive at under 11x FY2015's expected EPS and the shares have a five year projected PEG of under 1 (.93).
Checkpoint Systems, Inc. (NYSE:CKP) manufactures and provides technology-driven, loss prevention, inventory management and labeling solutions to the retail and apparel industry worldwide. The company operates in three segments: Merchandise Availability Solutions, Apparel Labeling Solutions, and Retail Merchandising Solutions. The company has a market capitalization a bit over $500mm. Checkpoints is priced at just under $13 a share.
This is another small cap tech play that has a five year projected PEG of under 1 (.92) and an impressive earnings trajectory. Checkpoint earned 42 cents a share in FY2013 but analysts project earnings will grow ~80% to over 75 cents a share this fiscal year. The consensus sees almost a buck a share in profits for 2015.
The company has a solid balance sheet with some $30mm in net cash on the books. The shares go for less than 13x FY2015's projected EPS. Only three analysts cover the stock and their price targets are in a tight range of $19 to $20 a share. The stock has been in the "penalty box" for some minor accounting issues that caused it to restate some financials. The shares are down ~10% from their highs in March. Hopefully the company can put that issue in the rear view mirror in the months ahead.
I may be a bit early but these small cap growth plays in Technology seem worth consideration at these levels.