Interested in following smaller companies? Looking for undervalued stocks? Company liquidity is an important consideration in any stock analysis. Liquidity gives a company the ability to make big acquisitions if it sees investment opportunities, a cushion for future lulls in demand, and most importantly, it keeps a company's doors open. Are these the types of stocks that you're looking for? For ideas on where to look, we ran a screen you might find interesting.
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.
The Price/Sales ratio is a price-multiple valuation metric used to help identify if a firm is cheap by its twelve month trailing sales numbers. In the most basic terms it lets an investor know how much the investment community is willing to pay for every dollar's worth of sales. A firm with a P/S ratio of one or lower would be viewed as cheap because investors are paying $1 or less for every dollar's worth of a firm's sales. On the other hand, a firm is generally considered to be expensive when the P/S ratio is above three. These are general guidelines used by the investment community, not hard rules. Price/Sales Ratio = Current Stock Price/Revenue (sales) per Share
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. From here, we then looked for companies that are undervalued when company growth rate is taken into account (PEG Ratio < 1)(P/S<1). From here, we then looked for companies with a large 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 a positive future in store? Use this list as a starting-off point for your own analysis.
Bio-Reference Laboratories Inc. (BRLI)
|Industry:||Medical Laboratories & Research|
Bio-Reference Laboratories Inc. has a Price/Earnings to Growth Ratio of 0.87; a Price/Sales Ratio of 0.96; a Current Ratio of 2.48; and a Quick Ratio of 2.36. The short interest was 21.70% as of 05/24/2012. Bio-Reference Laboratories, Inc. provides clinical laboratory testing services for the detection, diagnosis, evaluation, monitoring, and treatment of diseases primarily in the greater New York metropolitan area. The company offers chemical diagnostic tests, such as blood and urine analysis, blood chemistry, hematology services, serology, radio-immuno analysis, toxicology, pap smears, tissue pathology, and other tissue analysis, as well as performs cancer cytogenetic testing. It primarily focuses on esoteric testing, molecular diagnostics, anatomical pathology, genetics, women's health, and correctional health care services.
Finish Line Inc. (FINL)
Finish Line Inc. has a Price/Earnings to Growth Ratio of 0.94; Price/Sales Ratio of 0.83; Current Ratio of 3.99; and Quick Ratio of 2.40. The short interest was 9.61% as of 05/24/2012. The Finish Line, Inc., together with its subsidiaries, operates as a mall-based specialty retailer in the United States. It operates Finish Line stores that offer performance and athletic casual footwear, apparel, and accessories for men, women, and kids. The company also sells merchandise through its Web site.
LSB Industries Inc. (LXU)
|Industry:||General Building Materials|
LSB Industries Inc. has a Price/Earnings to Growth Ratio of 0.86; Price/Sales Ratio of 0.77; Current Ratio of 3.68; and Quick Ratio of 2.90. The short interest was 2.86% as of 05/24/2012. LSB Industries, Inc., through its subsidiaries, engages in the manufacture and sale of geothermal and water source heat pumps, air handling products, and chemical products. The company operates in two segments, Climate Control Business and Chemical Business. The Climate Control Business segment manufactures and sells heating, ventilation, and air conditioning products that include geothermal and water source heat pumps; hydronic fan coils; and other HVAC products, such as custom air handlers and modular geothermal chillers.
Basic Energy Services, Inc. (BAS)
|Industry:||Oil & Gas Equipment & Services|
Basic Energy Services, Inc. has a Price/Earnings to Growth Ratio of 0.56; Price/Sales Ratio of 0.36; Current Ratio of 2.86; and Quick Ratio of 2.59. The short interest was 8.94% as of 05/24/2012. 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.
Altra Holdings, Inc. (AIMC)
|Industry:||Industrial Electrical Equipment|
Altra Holdings, Inc. has a Price/Earnings to Growth Ratio of 0.82; Price/Sales Ratio of 0.66; Current Ratio of 3.39; and Quick Ratio of 2.11. The short interest was 4.90% as of 05/24/2012. Altra Holdings, Inc., through its subsidiary, Altra Industrial Motion, Inc., designs, produces, and markets a range of mechanical power transmission and motion control products worldwide. The company provides industrial clutches and brakes for elevators, forklifts, lawn mowers, oil well draw works, punch presses, and conveyors; open and enclosed gearing products for conveyors, ethanol mixers, packaging machinery, and metal processing equipment; and engineered couplings for extruders, turbines, steel strip mills, and pumps.
Cascade Corp. (CASC)
|Industry:||Farm & Construction Machinery|
Cascade Corp. has a Price/Earnings to Growth Ratio of 0.79; Price/Sales Ratio of 1.00; Current Ratio of 3.75; and Quick Ratio of 2.22. The short interest was 2.56% as of 05/24/2012. Cascade Corporation engages in the manufacture and distribution of materials handling load engagement devices and related replacement parts under the Cascade name primarily for the lift truck and construction industries worldwide. It offers lift truck related products that are designed to handle loads with pallets and for specialized application loads without pallets; and specialized products, which include devices specifically designed to handle appliances, carpet and paper rolls, baled materials, textiles, beverage containers, drums, canned goods, bricks, masonry blocks, lumber, and plywood, as well as boxed, packaged, and containerized products. The company also provides construction related products to enable loaders, backhoes, and rough terrain lift trucks to move materials, as well as for use on excavators and loaders for conventional and specialized ground engagement applications.
Newpark Resources Inc. (NR)
|Industry:||Oil & Gas Equipment & Services|
Newpark Resources Inc. has a Price/Earnings to Growth Ratio of 0.67; Price/Sales Ratio of 0.52; Current Ratio of 3.92; and Quick Ratio of 2.68. The short interest was 11.29% as of 05/24/2012. Newpark Resources, Inc. provides various products and services primarily to the oil and gas exploration industry. It operates in three segments: Fluids Systems and Engineering, Mats and Integrated Services, and Environmental Services. The Fluids Systems and Engineering segment provides drilling fluids products and technical services for technical drilling projects involving complex subsurface conditions, such as horizontal directional, geologically deep, or deep water drilling.
Kraton Performance Polymers Inc. (KRA)
Kraton Performance Polymers Inc. has a Price/Earnings to Growth Ratio of 0.79; Price/Sales Ratio of 0.43; Current Ratio of 4.37; and Quick Ratio of 2.42. The short interest was 6.62% as of 05/24/2012. Kraton Performance Polymers, Inc., through its subsidiary, Kraton Polymers LLC, engages in the development, production, and marketing of styrenic block copolymers (SBCs) and non-SBC products worldwide. The company offers approximately 250 core commercial grades of SBCs. Its products include unhydrogenated SBCs that are primarily used in paving and roofing, adhesives, sealants, coatings, and footwear applications; hydrogenated SBCs that are primarily used in soft touch and flexible materials, personal hygiene products, medical products, automotive components, adhesives, and sealants; and isoprene rubber products for use in the production of medical products, adhesives, tackifiers, paints, coatings, and photo-resistors.
Cash America International, Inc. (CSH)
Cash America International, Inc. has a Price/Earnings to Growth Ratio of 0.65; Price/Sales Ratio of 0.78; Current Ratio of 4.59; and Quick Ratio of 3.70. The short interest was 15.39% as of 05/24/2012. 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.
*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.