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Value, research analyst, author, long only
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I have followed two small-cap stocks over the past couple months, watching their value increase. Team Staff Inc. (TSTF) and Express-1 Expedited Solutions (NYSE:XPO) have a combined market cap of under $160 million. Both stocks have seen significant gains breaking 52-week highs during the past three days. XPO has seen gains over 20% while TSTF has seen gains over 75%.
These small-cap stocks are seeing incredible gains; while they are completely different companies, they share many of the same similarities. Both TSTF at $2.95 and XPO at $4.21 have a small float and tend to hold their prices without seeing large amounts of short pressure. There have been traders who have bought into these companies for the quick gains, but many shareholders of these two companies are investors. Both companies have announced significant changes to their operations, which will affect and produce gains for a long time to come.
Express 1 made the announcement of Jacobs Private Equity making an investment of $150 million and Bradley Jacobs taking over as CEO. This is significant news because of Jacobs’ success in turning small companies into multibillion dollar corporations. Jacobs has stated his intentions, saying that he will build this company through a series of acquisitions and that he had reviewed roughly 100 companies. With the date of this change rapidly approaching, investors are placing their bets on Express 1 as Jacobs has shown success in building these mega companies at will. XPO appears to have the makings of a company that will produce long-term, consistent gains over a period of years.
Team Staff has watched its stock price grow in a very fast manner. While it is always scary to see gains this quick, investors can justify its gain because of its current cap. Team Staff has announced three significant contracts which drastically change the company. In a previous article I outlined and explained how the company could easily see revenue in excess of $64 million. I also explained the last time Team Staff reported revenue in this amount, the company traded in a range of $5-7. Team Staff could easily exceed revenue of $64 million. The company's contracts consist of a fixed contract with Veteran Affairs for $8.275 million over 10 years, a mail pharmacy deal valued at $140 million over five years, a naval deal giving the company access to bids which exceed $5 billion per year, and a base salary.
These two companies are seeing large gains over a short period of time. I believe these short term gains are insignificant in comparison to the gains they will see over the next 52 weeks. Due diligence is being performed and the value of these companies are coming into play. I expect larger gains over time versus the gains we have seen, as I believe both companies have value much greater than their current stock prices.
Disclosure: I am long TSTF.
Source: 2 Small-Cap Stocks Seeing Impressive Gains