Small-cap stocks tend to offer investors greater growth opportunities than large-cap alternatives, although this comes with its fair share of added risk. Are you looking for small-caps? Interested in technology companies? Do you prefer investing in stocks that analysts have weighed in on? Do you prefer companies with strong profits? We ran a screen you might be interested in.
The net margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability. net margin = Net Income/Total Revenue
Return on equity [ROE] is one way to identify great potential names relative to profitability. This ratio illustrates the percentage return on shareholder equity. As well, this metric segments the company into operational efficiency, asset use efficiency, and financial leverage. Why does this matter? Simply put, it allows investors to get a real picture of how the company is generating these returns and helps identify parts of the company that may be underperforming.
We first looked for small cap technology stocks. We then looked for businesses that analysts rate as "Buy" (2 < mean recommendation < 3). We then looked for businesses with strong profitability (net margin [TTM] >10%)(ROE [TTM]>30%).
Do you think these small-cap stocks can offer attractive returns? Use this list as a starting-off point for your own analysis.
1) Medidata Solutions, Inc. (NASDAQ:MDSO)
|Industry:||Healthcare Information Services|
Medidata Solutions, Inc. has an analysts' rating of 2.40, net margin of 21.36% and return on equity of 50.76%. The short interest was 10.19% as of 05/05/2012. Medidata Solutions, Inc. provides software-as-a-service based clinical development solutions for life science organizations worldwide. Its solutions comprise software and services that allow customers to increase the value of their development programs by designing, planning, and managing key aspects of the clinical trial process, including study and protocol design, trial planning and budgeting, site negotiation, clinical portal, trial management, randomization and trial supply management, clinical data capture and management, safety events capture, medical coding, clinical business analytics, and data flow and interoperability. The company primarily offers Medidata Rave, a comprehensive platform for capturing and managing clinical data.
2) NIC Inc. (NASDAQ:EGOV)
NIC Inc. has an analysts' rating of 2.00, net margin of 12.68% and return on equity of 38.28%. The short interest was 4.07% as of 05/05/2012. NIC Inc. provides eGovernment services that enable governments use the Internet to provide various services to businesses and citizens in the United States. It operates in two segments, Portal Outsourcing, and Software and Services. The Portal Outsourcing segment enters into long-term contracts with governments to design, build, and operate Web-based enterprise-wide portals on their behalf.
3) BroadSoft, Inc. (NASDAQ:BSFT)
BroadSoft, Inc. has an analysts' rating of 1.90, net margin of 23.39% and return on equity of 34.77%. The short interest was 25.51% as of 05/05/2012. BroadSoft, Inc. provides software and services that enable mobile, fixed-line, and cable service providers to deliver unified communications and other voice and multimedia services over Internet protocol (IP) based networks. The company's communications platform consists of BroadWorks software, which enables its service provider customers to provide enterprises and consumers with a range of cloud-based or hosted IP multimedia communications, such as private branch exchanges, video calling, unified communications, collaboration, and converged mobile and fixed-line services; BroadCloud hosted or cloud service that enables its service provider customers to offer Web collaboration, video conferencing, instant messaging, presence, and short messaging to their end-users; and BroadTouch, a client application that enables carriers to offers unified communications services for smartphones, tablets, desktops, and laptops. It also provides a range of professional support services, including pre-sales support; installation, network integration, project management, and remote upgrade services, as well as consulting services; product life-cycle services; and training services.
4) Power-One Inc. (NASDAQ:PWER)
Power-One Inc. has an analysts' rating of 2.30, net margin of 13.35% and return on equity of 33.49%. The short interest was 5.43% as of 05/05/2012. Power-One, Inc. engages in the design, manufacture, sale, and service of power supply products for the renewable energy (RE), servers, storage and networking, telecommunications, industrials, and network power systems industries worldwide. Its products convert, regulate, purify, store, manage, or distribute electrical power for electronic equipment. The company provides RE inverters, which convert solar or wind energy into useable grid connected power for use in residential and commercial, and utility-grade solar panels, as well as wind turbine farms; and alternate current (AC)/direct current (DC) power supplies that convert AC into DC voltage used primarily in networking systems, network servers and storage, and industrial equipment.
5) Computer Programs & Systems Inc. (NASDAQ:CPSI)
|Industry:||Healthcare Information Services|
Computer Programs & Systems Inc. has an analysts' rating of 1.60, net margin of 14.89% and return on equity of 49.75%. The short interest was 5.20% as of 05/05/2012. Computer Programs and Systems, Inc., a healthcare information technology company, designs, develops, markets, installs, and supports computerized information technology systems to small and midsize hospitals in the United States. Its enterprise-wide system automates the management of clinical and financial data across the primary functional areas of a hospital. The company offers services that enable customers to outsource certain data-related business processes in the areas of clinical care, revenue cycle management, cost control, and regulatory compliance.
6) GT Advanced Technologies Inc. (GTAT)
|Industry:||Semiconductor - Specialized|
GT Advanced Technologies Inc. has an analysts' rating of 2.30, net margin of 17.89% and return on equity of 80.58%. The short interest was 15.12% as of 05/05/2012. GT Advanced Technologies Inc. provides polysilicon production technology and multicrystalline ingot growth systems, and related photovoltaic (PV) manufacturing services for the solar industry worldwide. It also offers sapphire growth systems and material for the LED and other specialty markets. The company's principal products comprise chemical vapor deposition reactors and related equipment used to produce polysilicon; directional solidification furnaces and related equipment used to cast multicrystalline silicon ingots, which are used to make PV wafers; advanced sapphire furnaces used to crystallize sapphire boules that are used to make sapphire wafers; and sapphire material primarily used to make various products, such as epitaxial-ready wafers.
*Company profiles were sourced from Finviz. Financial data was sourced from Finviz and Google Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.