There are several good opportunities within the market presenting value. Stocks have lost significant portions of value yet earnings are expected to be strong with very few companies lowering guidance. And while there are hundreds of good stocks offering value, which will most likely result in gains over the next year, there are some that I believe have the potential to double over the next year. Stocks of all sizes fit into this category. I will be focusing on small-cap stocks only, with market caps under $500 million. Below are eight stocks that I believe will double in price over the next year.
Majestic Entertainment Company (COOL) has been an up and down stock over the last year, reaching $4.53 as a 52-week high in June. The stock is now trading at $2.33, a one-year gain of 264%, and despite its gains the stock is only trading with a P/E of 10. Usually, when a stock posts gains of this magnitude, it's either a speculative stock awaiting some big product or it's trading with optimism high above earnings. This small cap stock, with a market cap of just under $100 million, is neither of the two, and after considering its remarkable growth I believe that as the market recovers this stock will post incredible gains.
To better understand the company's growth you must understand its earnings. During 2010 the company posted $75.65 million in revenue and a net loss of less than $1 million. But during the last 12 months the company has posted revenue of $123.54 million and a profit margin of 7.45%. Which means that revenue increased by 65% and a net loss became a decent profit margin. In addition, the company has a forward P/E of 5.30 meaning that the company's earnings for next year are expected to increase by large margins. The company has very solid returns on both assets and equity and has recently announced exciting news that could result in higher profits above expectations. The company is releasing the sequel to its best selling Zumba video game, which sold more than 3 million copies world-wide. The original release of the first Zumba video game is a large reason the stock experienced such high gains and now with a second version, that will include tracks from popular artists, I believe the games loyal fans will flock to the stores to purchase the product. In addition to Zumba 2, the company is releasing Parking Wars 2, the popular Facebook game which is sure to be a success. And with a market cap below $100 million, a P/E of 10, and no debt on its balance sheet I believe this stock is well positioned for long-term growth and large gains beyond its $4.50 price target.
Acura Pharmaceuticals (ACUR) is a stock that I believe could have a multi-billion dollar market cap within the next 10 years. The stock currently trades with a market cap of $170 million after posting a 33% gain over the last month. The large gains began after the company was awarded a key U.S. patent for abuse deterrent drug formulations. The patent is for the company's AVERSION technology which discourages the common methods of prescription drug misuse and abuse which include: injection of dissolved tablets, snorting crushed tablets, and intentionally swallowing in excess quantities. The company's first drug using this technology, Oxecta, was approved earlier this year, which is the first immediate release oxycodone HCI medication that applies the AVERSION technology. The company teamed with Pfizer (PFE) to develop this drug, and now has four additional drugs, with Pfizer, that hope to be approved using the AVERSION technology.
Since we now understand the drug I must explain why I believe this company will be a multi-billion dollar company within 10 years. The simple explanation would be that opiate abuse is an epidemic that is spreading like a wild fire, it does not discriminate against race, age, sex or social class. The abuse is everywhere, with people that you would never expect, and as a former state employee that ran a division of narcotic abuse programs for the state of Kentucky for pre-release inmates I have seen this addiction take control of someone's life first hand. And what many people don't understand is that addicts don't begin using opiates with the intention of becoming an addict, it develops over time as they build a tolerance, and I have seen studies that suggest more than 60% of all opiate addicts become addicted to the drug as the result of an injury. The fact is that people experience pain, and at some point in everyone's life they will need some form of opiate drug to relieve pain. The problem is that several of these instances begin the cycle of abuse.
But now doctors have an option that includes providing patients with the same level of care and pain management, while lowering the risk of addiction. However, addiction is a multi-billion dollar issue. The amount of revenue that Watson Pharmaceuticals receive from hydrocodone, which is highly addictive, and the amount of revenue that Reckitt Beckiser receives from Suboxone, to treat addiction, is mind boggling. Oxecta and future drugs with the AVERSION technology will offer patients the same drug but with a deterrent that makes it difficult for the patient to get "high" and ultimately addicted. I believe it will take time for the switch to take place, but Pfizer is the best at marketing, and with a drug this transcendent I believe that marketing will be quite easy. I believe this company will control the pain management industry within 10 years, with its new patent, which will ultimately result in unbelievable gains for investors, and best of all, I believe the large gains will begin over the next 12 months, with exciting developments and revenue from sales, as the stock easily exceeds its $8.00 price target.
Coffee Holding Company (JVA) is much different from the others as to how I would trade the stock. With COOL, ACUR and ZAGG I believe each are long-term investments, but JVA may present the best short-term opportunity for large gains. The stock is trading at nearly $8 after the stock reached a price above $30 in July. The company has much improved income statements, with revenue and earnings significantly increasing year-over-year, and the company's balance sheet is strong as well with a debt-to-assets ratio below 25%, and cash of nearly $4.
The stock is considered very small, with a market cap of under $45 million with a P/E of just 14.50. A price to earnings of 14.50 is very small for a company with such explosive growth that has the ability to double any given week. The stock trades very close to the price of coffee which has dropped from a high of $290 to a price of $230. This drop in price appears to have directly affected the stock of JVA, which has shown some stability over the last three days. On October 3 the price of coffee reached $220. But over the last two days of gains the commodity increased by $10, and JVA showed signs of recovery posting moderate gains. It appears the commodity has reached a bottom and is now trying to trend higher, and with Coffee Holding Company's improved fundamentals investors will be quick to jump on the bandwagon. I am not sold on the company's ability to maintain long-term growth in this industry, however, I am sold the fact that it can very easily post large gains in a matter of days. So while I believe the other three stocks on this list present good long-term purchases, I believe this stock could double over the next month, but I am unsure of its performance over the next several years.
Zagg Inc (ZAGG) trades with a market cap of $350 million and a stock price near $12. The stock has performed fairly well over the last three months, only losing 5% of its value. Yet, the stock has lost nearly 20% of its value over the last month as rumors of accounting issues spread throughout the market. I am particularly bullish on this stock, which has reached a 52 week high price over $17.00 back in August. As I said, the stock had held up fairly well during the strong selling over the last three months, but it was trading with an uptrend until market conditions forced it lower. I believe that as the market recovers ZAGG will rise among the largest returns within the market over the next year.
The company is directly affected by the success of the fastest growing industry within the market, communications. It sells and distributes shields, skins, cases and other products for the communication devices such as smart phones and tablets, and it's by far the leader in its industry. The company has created, or is creating, products for each of the best selling communication devices being sold, including the new iPhone 4S.
The company has capitalized on the consumer that wants the devices, but prefers to make it unique with accessories. And while everyone feels a little different regarding the products that ZAGG offers, one thing is for sure, its product sells. The company's revenue stream is growing at a remarkable rate, with 2009 posting $38.36 million, 2010 posting $76.14 million, and the last 12 months posting $118.08 million. The growth is incredible. During the last quarter revenue increased by 157% and income doubled, as new partners and products begin to lift this company to new heights. In addition, the company has a strong balance sheet with $13.45 million in cash, a low debt-to-asset ratio, and strong returns on assets and equity. The company just keeps getting stronger. In June ZAGG acquired iFrogz, which many consider to be its largest competitor, that makes similar products including a large selection of audio accessories. I believe that these two companies combined with a fast growing market will result in Zagg experiencing both short and long-term success, with a realistic possibility to exceed the $18.60 one year price target, as analysts are incapable of predicting its fast growth.
8x8 Inc (EGHT) is a small company with a market cap of $265 million that is trading with a lot of optimism and a price-to-earnings above 37. The optimism surrounding this company revolves around its future and its present operations within the communications industry. EGHT is a leader in business communications and is now enjoying recent success with the emergence of its VOIP service. The company's VOIP includes a virtual room that allows up to 20 people from any location to communicate through the cloud. This service is growing in use and popularity among other companies that are benefiting from the service's efficiency.
EGHT provides several services that each incorporate modern technology with a new found emphasis on the cloud. The company also purchased Contactual which will expand its cloud communication services portfolio, as a company that focuses on call center solutions and cloud computing. I believe this service will be incorporated into the 8x8's other services to allow them to run more efficiently and aid in marketing and sales. EGHT has proven itself to be innovating in this new age of technology as both its revenue and profit have improved. The company has a profit margin of more than 10%, which has drastically increased, and returns on equity and assets of similar margins. It also has no debt on its balance sheet and nearly $20 million in cash. I believe that as the industry continues to evolve EGHT will benefit as other companies realize the distinct benefits that EGHT offers to its customers. Therefore, I believe that EGHT will easily exceed its $5.01 price target and continue to grow as the cloud based technology evolves everyday.
XPO Logistics (XPO) is a transportation services company with a market cap of $62 million and a price to earnings of near 14. The stock is trading with a one year loss of nearly 20% after losing 60% of its value since July 21. The price of this stock nearly doubled between June and July of this year after the announcement that the company would receive a $150 million equity investment and a new CEO Bradley Jacobs. Yet, due to the sell-off within the market and a 4:1 stock split it's now trading only $1 from its 52 week low.
I believe this stock has the potential to post very large gains over the next year from its current position. The company has solid fundamental performance with a strong balance sheet and an income statement that reflects a consistently growing revenue stream. The company's debt-to-equity and debt-to-assets are considerably low which gives the company the flexibility to make changes for future growth. Yet neither the income statement nor balance sheet is why I believe this stock will post such large gains, but rather the recent equity investment and the new CEO with a proven track record of success.
Bradley Jacobs is the best at taking small companies and turning them into multi-billion dollar corporations, such as United Rentals, United Waste Systems, Hamilton Resources, and Amerex Oil Associates. Jacobs either founded or co-founded each of these companies, and was responsible as the CEO for the $1 billion in yearly revenue that each company produced during his tenure. Bradley Jacobs has proven himself to be quite extraordinary when it comes to creating multi-billion dollar companies with his largest of the four being United Rentals, the world's largest equipment rental company. And the interesting concept behind his magic is that he builds the companies through what I believe is common sense. He first reorganizes management and then acquires additional companies that aid in growth. Bradley Jacobs has already stated his intentions during a Reuters interview in which he said "We're going to start off buying some small and medium-size companies but over time the plan is to certainly buy some larger companies as well." During the same interview he added "I've been meeting with roughly 100 acquisition candidates over the last two months and they are of all sizes, I've looked at companies as little as $10 million to $20 million in revenue, and I've looked at companies approaching $1 billion in revenue." Jacobs appears to be sure that his plan will work, and why wouldn't it, he's been successful at every other company.
I believe that his goal of turning XPO into a muti-billion dollar company, which he stated during the Reuters interview, is very likely, with the size of the U.S. freight brokerage market estimated at $50 billion a year and the size of the international freight forwarding market estimated at $150 billion a year. Therefore he has a very large platform to create his "mega company." And XPO has solid fundamentals, it's not like he is starting with a company that has millions in debt with toxic assets. But rather an efficient company in a large industry that now has a great leader. Jacobs has been the CEO for over a month, and the Reuters interview was in June, therefore I expect the acquisitions to begin by the end of this year and for XPO to begin trending higher, and eventually double, maybe triple, by October of 2012 with several acquisitions to be completed.
Additional disclosure: One year price targets were obtained from Yahoo, financial information was obtained from either Yahoo or earning reports. As with any investment, due diligence is required. The opinions in this article are not intended to be used to make a particular investment or follow a particular strategy.