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The stock market continues to behave well, and prospects for accelerating economic growth seem to be improving. Equities have had an over 20% rally over the last six months, and bargains are getting harder to come by. I continue to have to dig deeper into underfollowed smaller cap stocks to find reasonable valuations. Here are two firms that are projected to show solid earnings growth over the next two years and have decent valuations. They should do well as long as the economy continues to grow.

Coleman Cable Inc. (CCIX) designs, develops, manufactures, and supplies electrical wire and cable products for consumer, commercial, and industrial applications in the United States and Canada. It offers industrial wire and cable products, including portable cords, machine tool wiring, building wires, welding, mining, pumps, controls, stage/lightings, diesel/locomotives, instrumentation, trays, and metal clad cables and other power cord products under the Royal, Seoprene, Copperfield, and Corra/Clad brand names. (Business Description from Yahoo Finance)

4 reasons CCIX is a good value at $11 a share:

  • The company is rapidly increasing earnings. It made $0.67 a share in FY2010, looks to earn $1.40 in FY2011 and analysts project it to make $1.57 a share in FY2012.
  • The stock has a five year projected PEG of 1.04 and is priced at just over 7 times forward earnings.
  • The stock is selling near the bottom of its five year valuation range based on P/E and P/CF.
  • The median analysts' price target on CCIX is $14 a share and the stock has easily beat earnings estimates for three straight quarters.

LSI Corporation (LSI) designs, develops, and markets storage and networking semiconductors and storage systems worldwide. Its Semiconductor segment offers integrated circuits for hard disk, solid state, and tape drive solutions, which are used to store and retrieve data in personal computers, corporate network servers, archive/back-up devices, and consumer electronics products. (Business Description from Yahoo Finance)

4 reasons LSI is a buy at $8 a share:

  • The company has a pristine balance sheet with 20% of its market capitalization in net cash.
  • The company is projected to show solid earnings gain. It earned 50 cents a share in FY2011, is expected to earn 58 cents a share in FY2012 and analysts project it to make 73 cents a share in FY2013.
  • The stock has a low five year projected PEG (.90) and analysts expect over 17% revenue growth in FY2012.
  • Earnings estimates for FY2012 and FY2013 have significantly gone up (>10%) over the last month.
Source: 2 Underfollowed Stocks With Improving Earnings Prospects