ACADIA Pharmaceuticals Inc. (ACAD), Alliance Fiber Optic Products Inc. (AFOP), Gaming Partners International Corporation (GPIC), Global Sources Ltd. (GSOL), and China Cord Blood Corporation (CO) are three small cap stocks with attractive valuations. All of these companies have significant cash positions and insider ownership, while most of them are positioned for solid growth in the coming quarters. The exact screen used for this article included the following:
- Small and Micro Cap Stocks
- Price/Cash Ratio Below 3
- Debt/Equity Ratio Below 0.1
- Insider Ownership Over 10%
- PEG Ratio Below 1
- Positive EPS Growth this Year
- Positive EPS Growth Next Year (Projected)
ACADIA Pharmaceuticals Inc.
ACADIA Pharmaceuticals Inc. is a biopharmaceutical company focused on the development of small molecule drugs for the treatment of central nervous system disorders. With more than $41 million in current assets last quarter, the company has a significant cash position relative to its market capitalization and a solid pipeline of development opportunities in late-stage clinical trials.
In August, the company announced important progress on the execution of its Phase III program with pimavanserin for Parkinson’s disease psychosis. The firm continues to enroll patients in the ongoing -020 Phase III efficacy, tolerability and safety study and the -015 Phase III open-label safety extension study. With a portfolio of four product candidates, it is in a solid position for future growth.
Alliance Fiber Optic Products Inc.
Alliance Fiber Optic Products Inc. is a developer of fiber optic components and integrated modules that incorporate those components for communications equipment manufacturers. With a healthy current asset base of more than $51 million (compared to a $72 million market capitalization), the company’s stock trades at just 12x its trailing 12-month earnings.
While the company’s business slowed some 2% last quarter, investors are pricing in virtually no chance of recovery for this fiber optics company. Demand for bandwidth continues to increase long-term and the fiber optic market has shown signs of recovery during the first half of the year. As a result, the firm expects to grow 5-10% sequentially moving forward.
Gaming Partners International Corporation
Gaming Partners International Corporation is a manufacturer and supplier of casino chips and other gaming devices and accessories. With some $43.3 million in current assets, compared to a $59 million market capitalization, the company is well-capitalized and profitable. Meanwhile, its modest 14x trailing 12-month price-earnings ratio suggests that it may be undervalued.
While the company has seen lower growth from the economic slowdown, its focus is beginning to shift to the rapidly growing Asian markets through a new subsidiary in Macau. Currently, the Macau region represents the greatest expansion in gaming worldwide, and its exposure to that market could more than offset the decline in activity seen in the U.S. and Europe.
Global Sources Ltd.
Global Sources Ltd. provides services that allow global buyers to identify suppliers and products and enable suppliers to market their products to a number of buyers. With $133 million in cash and equivalents and shareholders’ equity of more than $110 million, the profitable and growing company appears to be relatively undervalued with a $266 million market cap and 10x trailing P/E ratio.
Last quarter, the company reported 13% growth in its revenues with China now accounting for nearly 80% of its total business. The firm is focusing primarily on China’s exports and domestic B2B industry as a key source of growth. In addition to introducing new verticals, like Solar and Medical, the company has also held more China Sourcing Fairs this year and has other plans to expand.
China Cord Blood Corporation
China Cord Blood Corporation is a provider of cord blood storage services in China. With $100 million in cash and equivalents and shareholders’ equity of over $170 million, the profitable company appears to be undervalued relative to its $237 million market capitalization given its price-earnings multiple of just 12x.
Last quarter, the company’s revenues increased 22% due to growth in new subscribers and an increase in its processing fee implemented in April of 2011. The firm’s highly scalable and recurring revenues business model should help it to continue its growth as it expands into new geographical regions such as Beijing and Guangdong.