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? Do you prefer companies with strong profits? Do you prefer companies with high liquidity? For ideas on how to start your search, we ran a screen you may find helpful.
The Operating Profit Margin is a profitability ratio that measures the effectiveness of the company's operating efficiency. This metric allows investors to see how much profit is left after all variable costs are covered. If the company's margin is increasing over time this means that it's earning more per dollar of sales. Finding trends in the Operating Profit Margin helps investors identify companies that are improving profitability over time and managing the economic landscape better than competitors.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. EPS growth rates help investors identify stocks that are increasing or decreasing in profitability. This profitability metric is generally a key driver in the price of the stock as it directly correlates to the profitability of the company as a whole.
The Current ratio is a liquidity ratio used to determine a company's financial health. The metric illustrates how easily a firm can pay back its short obligations all at once through current assets. A company that has a current ratio of one or less is generally a liquidity red flag. Now this doesn't mean the company will go bankrupt tomorrow, but it also doesn't bode well for the company, and may indicate that it could have an issue paying back upcoming obligations.
The Quick ratio measures a company's ability to use its cash or assets to extinguish its current liabilities immediately. Quick assets include assets that presumably can be converted to cash at close to their book values. A company with a Quick Ratio of less than 1 cannot currently pay back its current liabilities. The quick ratio is more conservative than the Current Ratio because it excludes inventory from current assets, since some companies have difficulty turning their inventory into cash. If short-term obligations need to be paid off immediately, sometimes the current ratio would overestimate a company's short-term financial strength. In general, the higher the ratio, the greater the company's liquidity (i.e., the better able to meet current obligations using liquid assets).
We first looked for small cap stocks. We then screened for businesses with strong profit margins (1-year operating margin>15%)(1-year fiscal EPS growth rate>10%). From here, we then looked for companies that have a substantial amount of cash on hand (Current Ratio>2)(Quick Ratio>2). We did not screen out any sectors.
Do you think these small-cap stocks have higher to rise? Use this list as a starting-off point for your own analysis.
1) ADTRAN Inc. (ADTN)
ADTRAN Inc. has a Operating Profit Margin of 23.27% and Earnings Per Share Growth Rate of 18.71% and Current Ratio of 5.50 and Quick Ratio of 4.16. The short interest was 9.52% as of 05/18/2012. ADTRAN, Inc. designs, manufactures, markets, and services communications network solutions that enable voice, data, video, and Internet communications across wireline and wireless networks worldwide. Its Carrier Networks division provides fiber and copper-based solutions for service providers to deliver voice, data, and video services to customers' premises and mobile network cell sites. Its products enable services, such as voice, VoIP, IP television, RF video, high speed Internet access, and data services based upon Ethernet, frame relay, TDM, and ATM networks, connecting the network with user components, such as switches, routers, gateways, integrated access devices (IADs), private branch exchanges (PBXs), and telephone key systems.
2) ATRION Corp. (ATRI)
|Industry:||Medical Instruments & Supplies|
ATRION Corp. has a Operating Profit Margin of 30.95% and Earnings Per Share Growth Rate of 24.21% and Current Ratio of 9.23 and Quick Ratio of 6.23. The short interest was 4.02% as of 05/18/2012. Atrion Corporation, together with its subsidiaries, develops and manufactures fluid delivery devices, and ophthalmic and cardiovascular products primarily for medical applications in the United States, Canada, and internationally. The company's fluid delivery products comprise luer syringe check valves and one-way valves; tubing clamps; and specialized intravenous sets for use in anesthesia and oncology applications. Its cardiovascular products include MPS2 Myocardial Protection System that delivers essential fluids and medications to the heart during open-heart surgery; cardiac surgery vacuum relief valves; silicone vessel loops for retracting and occluding vessels in minimally invasive surgical procedures; and inflation devices for balloon catheter dilation, stent deployment, and fluid dispensing, as well as products used in heart bypass surgery to make a precision opening in the heart for attachment of the bypass vessels. The company's ophthalmic products comprise contact lens disinfection cases; and a line of balloon catheters used in the treatment of nasolacrimal duct obstruction in children and adults.
3) Computer Programs & Systems Inc. (CPSI)
|Industry:||Healthcare Information Services|
Computer Programs & Systems Inc. has a Operating Profit Margin of 23.54% and Earnings Per Share Growth Rate of 36.98% and Current Ratio of 2.84 and Quick Ratio of 2.74. The short interest was 5.75% as of 05/18/2012. 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.
4) Akorn, Inc. (AKRX)
|Industry:||Drugs - Generic|
Akorn, Inc. has a Operating Profit Margin of 26.68% and Earnings Per Share Growth Rate of 88.25% and Current Ratio of 3.34 and Quick Ratio of 2.09. The short interest was 13.61% as of 05/18/2012. Akorn, Inc. engages in the manufacture and marketing of diagnostic and therapeutic ophthalmic pharmaceuticals products, niche hospital drugs, and injectable pharmaceuticals in the United States and internationally. It offers products in various specialty areas, including ophthalmology, antidotes, anti-infectives, pain management, anesthesia, and vaccines. The company's Ophthalmic segment markets diagnostic products, including mydriatics and cycloplegics, anesthetics, topical stains, gonioscopic solutions, angiography dyes, and others primarily for use in the office setting.
5) C&J Energy Services, Inc. (CJES)
|Industry:||Oil & Gas Equipment & Services|
C&J Energy Services, Inc. has a Operating Profit Margin of 32.42% and Earnings Per Share Growth Rate of 372.97% and Current Ratio of 2.69 and Quick Ratio of 2.06. The short interest was 25.94% as of 05/18/2012. C&J Energy Services, Inc., through its subsidiaries, provides hydraulic fracturing, coiled tubing, and pressure pumping services to oil and natural gas exploration and production companies. The company offers hydraulic fracturing services to enhance the production of oil and natural gas from formations with low permeability; coiled tubing services to perform various functions associated with well-servicing operations and to facilitate completion of horizontal wells; and pressure pumping services, which include well injection, cased-hole testing, workover pumping, mud displacement, wireline pumpdowns, and pumping-down coiled tubing. It also constructs and sells oilfield equipment comprising hydraulic fracturing pumps, coiled tubing units, pressure pumping units, and other equipment for third-party customers in the energy services industry; and provides equipment repair services, and oilfield parts and supplies.
6) CARBO Ceramics Inc. (CRR)
|Industry:||Oil & Gas Equipment & Services|
CARBO Ceramics Inc. has a Operating Profit Margin of 31.07% and Earnings Per Share Growth Rate of 65.14% and Current Ratio of 4.35 and Quick Ratio of 2.33. The short interest was 40.18% as of 05/18/2012. CARBO Ceramics Inc. manufactures and supplies resin-coated ceramic and resin-coated sand proppants primarily used in the hydraulic fracturing of natural gas and oil wells in the United States and internationally. The company offers proppants, including CARBOHSP and CARBOPROP designed for use in deep gas wells; CARBOLITE used in medium depth oil and gas wells; CARBOECONOPROP; CARBOHYDROPROP used to enhance performance in slickwater fracture treatments; CARBOBOND LITE for oil and natural gas wells that are subject to the risk of proppant flow-back; and CARBOBOND RCS, a conductivity proppant. It also provides fracture simulation software, as well as offers fracture design, engineering, and consulting services to oil and natural gas companies.
*Company profiles were sourced from Finviz.