Interested in following smaller companies? Interested in companies with high liquidity? Looking for undervalued stocks? If so, here are some ideas to start your stock search.
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).
The Price/Cash Flow ratio is a price-multiple valuation metric that also measures a firm's future financial health. An advantage of using cash flow is that it removes non-cash factors, which helps provide a clearer picture of how much money the firm is taking in from a valuation standpoint. Price/Cash Flow Ratio = Current Stock Price/Cash Flow Per Share
The PEG ratio (price/earnings to growth ratio) is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share [EPS], and the company's expected growth. In general, the P/E ratio is higher for a company with a higher growth rate. Thus using just the P/E ratio would make high-growth companies appear overvalued relative to others. It is assumed that by dividing the P/E ratio by the earnings growth rate, the resulting ratio is better for comparing companies with different growth rates. A lower ratio is 'better' (cheaper) and a higher ratio is 'worse' (expensive) - a PEG ratio of 1 means the company is fairly priced.
We first looked for small cap stocks. We next screened for businesses with a large amount of cash on hand (Current Ratio>2)(Quick Ratio>2). We then looked for businesses that are trading at low price-multiple valuations (P/CFO<10)(PEG < 1). We did not screen out any sectors.
Do you think these small-cap stocks have strong operations? Use our list to help with your own analysis.
1) Basic Energy Services, Inc. (BAS)
|Industry:||Oil & Gas Equipment & Services|
Basic Energy Services, Inc. has a Current Ratio of 2.86 and Quick Ratio of 2.59 and Price/Cash Flow Ratio of 7.50 and Price/Earnings to Growth Ratio of 0.57. The short interest was 8.94% as of 05/21/2012. Basic Energy Services, Inc. provides various well site services to oil and natural gas drilling and producing companies in the United States. Its Completion and Remedial Services segment provides pressure pumping services, such as cementing, acidizing, fracturing, coiled tubing, nitrogen, and pressure testing; rental and fishing tools; coiled tubing; snubbing services; thru-tubing; cased-hole wireline services; and underbalanced drilling in low pressure and fluid sensitive reservoirs. This segment operates 222 pressure pumping units.
2) Helix Energy Solutions Group, Inc. (HLX)
|Industry:||Oil & Gas Equipment & Services|
Helix Energy Solutions Group, Inc. has a Current Ratio of 2.61 and Quick Ratio of 2.56 and Price/Cash Flow Ratio of 3.07 and Price/Earnings to Growth Ratio of 0.94. The short interest was 5.66% as of 05/21/2012. Helix Energy Solutions Group, Inc., together with its subsidiaries, operates as an offshore energy company. It provides reservoir development solutions and other contracting services to the energy market, as well as to its oil and gas properties. The company offers various contracting services in the Gulf of Mexico, North Sea, the Asia Pacific, and west Africa regions primarily in deepwater.
3) Entropic Communications, Inc. (ENTR)
|Industry:||Semiconductor - Broad Line|
Entropic Communications, Inc. has a Current Ratio of 10.73 and Quick Ratio of 9.91 and Price/Cash Flow Ratio of 1.61 and Price/Earnings to Growth Ratio of 0.95. The short interest was 13.38% as of 05/21/2012. Entropic Communications, Inc., fabless semiconductor company, designs, develops, and markets system solutions to enable connected home entertainment in the United States and internationally. Its products include integrated circuits and related software associated with home networking solutions based on the Multimedia over Coax Alliance standard; direct broadcast satellite [DBS]; high-speed broadband access; and silicon tuners. The company's home networking products enable the delivery of various streams of high-definition television-quality video, standard-definition television-quality video, and HD video, as well as other multimedia content, such as movies, music, games, and photos into and throughout the connected home.
4) Global Power Equipment Group Inc. (GLPW)
Global Power Equipment Group Inc. has a Current Ratio of 3.96 and Quick Ratio of 3.85 and Price/Cash Flow Ratio of 3.22 and Price/Earnings to Growth Ratio of 0.39. The short interest was 3.63% as of 05/21/2012. Global Power Equipment Group Inc. and its subsidiaries designs, engineers, and manufactures gas turbine auxiliary equipment; and provides routine and specialty maintenance services to customers in the utility and industrial sectors. Its gas turbine auxiliary equipment include filter houses, inlet systems, exhaust systems, diverter dampers, selective catalytic emission reduction systems, packaged skids, and precision parts and specialty fabrications. These products are primarily used in the operation of gas turbine power plants, as well as for other industrial, energy, and power-related applications.
5) Cash America International, Inc. (CSH)
Cash America International, Inc. has a Current Ratio of 4.59 and Quick Ratio of 3.70 and Price/Cash Flow Ratio of 20.27 and Price/Earnings to Growth Ratio of 0.65. The short interest was 15.39% as of 05/21/2012. Cash America International, Inc. provides specialty financial services to individuals in the United States and Mexico. The company operates in two segments, Retail Services and E-Commerce. The Retail Services segment provides pawn lending, consumer loans, and check cashing, as well as other ancillary services, such as money orders, wire transfers, and pre-paid debit cards.
6) Entegris, Inc. (ENTG)
|Industry:||Semiconductor Equipment & Materials|
Entegris, Inc. has a Current Ratio of 6.04 and Quick Ratio of 4.86 and Price/Cash Flow Ratio of 4.03 and Price/Earnings to Growth Ratio of 0.87. The short interest was 3.14% as of 05/21/2012. Entegris, Inc. develops, manufactures, and supplies products and materials used in processing and manufacturing in the semiconductor and other high-technology industries worldwide. It operates in three segments: Contamination Control Solutions, Microenvironments, and Specialty Materials. The Contamination Control Solutions segment offers liquid filtration products, components and systems, and gas filtration products that purify, monitor, and deliver critical liquids and gases to the semiconductor manufacturing process and similar manufacturing processes.
*Company profiles were sourced from Finviz. Financial data was sourced from Finviz and Yahoo Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.