Every investor wishes they had invested in companies like Apple (AAPL) before the stock soared. But to find the diamonds in the rough, you had to have done your research. One way to find potential home runs like Apple is to sort through companies in the small cap arena. After all, small caps have considerable room to grow. Today we sought to make the search a little easier by highlighting some small cap names that make considerable earnings and that have high projected growth over the next several years, and we came up with a pretty interesting list.
Return on Assets [ROA] illustrates how much a company is generating in earnings from its assets alone. This metric gives investors a picture of how profitable the company is relative to the assets in current possession. As well, it lets investors see how efficient and effective management is at generating earnings from the company's assets. While most management teams can probably make money by throwing money at an issue very few can make very large profits with little investment.
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.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. The 5-Year Expected EPS Growth Rate is a long term annual growth estimate, where the growth projections are made by analysts, the company or other credible sources.
We first looked for small cap services stocks. We then looked for businesses that have strong profitability relative to their asset base (ROA [TTM]>10%)(1-year fiscal EPS Growth Rate>10%). Next, we then screened for businesses with estimated high-growth, with 5-year projected EPS growth above 25%.
Do you think these small-cap stocks hold value that has yet to be priced in? Please use our list to assist with your own analysis.
1) Krispy Kreme Doughnuts, Inc. (KKD)
Krispy Kreme Doughnuts, Inc. has a Return on Assets of 64.58% and Earnings Per Share Growth Rate of 2039.81% and 5-Year Projected Earnings Per Share Growth Rate of 26.50%. The short interest was 7.23% as of 05/30/2012. Krispy Kreme Doughnuts, Inc. operates as a branded retailer and wholesaler of doughnuts, beverages, and treats and packaged sweets worldwide. The company's doughnuts products comprise Original Glazed doughnut; cake doughnuts and crullers; and seasonal doughnuts comprising hearts, pumpkins, footballs, eggs, and snowmen, as well as honeybuns, fruit pies, mini-crullers, and chocolate products. Its beverage products consists of drip coffees, coffee-based and non-coffee-based frozen drinks, juices, sodas, milks, water, frozen/blended beverages, and packaged and fountain beverages.
2) ZAGG Inc. (ZAGG)
|Industry:||Specialty Retail, Other|
ZAGG Inc. has a Return on Assets of 16.38% and Earnings Per Share Growth Rate of 52.80% and 5-Year Projected Earnings Per Share Growth Rate of 25.83%. The short interest was 56.80% as of 05/30/2012. ZAGG Inc, together with its subsidiaries, designs, manufactures, and distributes protective coverings, audio accessories, and power solutions for consumer electronics and hand-held devices primarily in the United States and Europe. The company offers its products under the invisibleSHIELD, ZAGGskins, ZAGGbuds, ZAGGsparq, ZAGGmate, ZAGGfolio, ZAGGkeys, iFrogz, Earpollution, iFrogz, and Earpollution brand names. Its invisibleSHIELD product is a protective film covering designed for iPods, iPads, laptops, cell phones, digital cameras, watch faces, global positioning systems, MP3 players, gaming devices, and rotary blades of military helicopters. The company's ZAGGaudio brand of electronics accessories and products primarily comprise ZAGGsmartbuds, a water resistant ear bud; ZAGGskins are a combination of customizable, high-resolution images with the scratch protection of ZAGG's invisibleSHIELD; ZAGGsparq is a portable battery that recharges various USB-charged devices, including the Apple iPads and iPhones, cell phones, handheld gaming systems, and digital cameras; ZAGG LEATHERskins are thin, pliable cases for personal electronics; ZAGGmate products are protective cases for the Apple iPad; ZAGGfolio, a functional case for the iPad 2 and tablet; and ZAGGkeys FLEX, a portable Bluetooth keyboard and stand.
3) Green Dot Corporation (GDOT)
Green Dot Corporation has a Return on Assets of 14.35% and Earnings Per Share Growth Rate of 12.28% and 5-Year Projected Earnings Per Share Growth Rate of 25.09%. The short interest was 23.13% as of 05/30/2012. Green Dot Corporation, a financial services company, together with its subsidiaries, provides money management solutions in the United States. It offers general purpose reloadable prepaid debit cards, and cash loading and transfer services. The company's products include Green Dot MasterCard, Visa-branded prepaid debit cards, and various co-branded reloadable prepaid card programs; Visa-branded gift cards; and MoneyPak and swipe reload proprietary products that enable cash loading and transfer services through its Green Dot Network.
4) Liquidity Services, Inc. (LQDT)
|Industry:||Catalog & Mail Order Houses|
Liquidity Services, Inc. has a Return on Assets of 14.82% and Earnings Per Share Growth Rate of 29.28% and 5-Year Projected Earnings Per Share Growth Rate of 29.67%. The short interest was 8.71% as of 05/30/2012. Liquidity Services, Inc. operates various online auction marketplaces for surplus and salvage assets in the United States. Its auction marketplaces include liquidation.com, which enables corporations and selected government agencies located in the United States to sell surplus and salvage consumer goods and capital assets; govliquidation.
5) Constant Contact, Inc. (CTCT)
Constant Contact, Inc. has a Return on Assets of 12.63% and Earnings Per Share Growth Rate of 693.37% and 5-Year Projected Earnings Per Share Growth Rate of 37.20%. The short interest was 27.97% as of 05/30/2012. Constant Contact, Inc. provides on-demand email marketing, social media marketing, event marketing, and online survey products primarily in the United States. It offers email marketing products, which allow customers to create, send, and track professional and affordable permission-based email marketing campaigns; and social media marketing products that allow customers to manage and optimize their presence across multiple social media networks. The company also provides event marketing products, which enable its customers to promote and manage events, communicate with invitees and registrants, capture and track registrations, and collect online payments; and online survey products that enable its customers to create and send surveys, and analyze the responses.
6) TiVo Inc. (TIVO)
TiVo Inc. has a Return on Assets of 20.32% and Earnings Per Share Growth Rate of 207.57% and 5-Year Projected Earnings Per Share Growth Rate of 40.00%. The short interest was 9.45% as of 05/30/2012. TiVo Inc., together with its subsidiaries, provides technology and services for television solutions, including digital video recorders (DVRs) and connected televisions in the United States and internationally. The company offers subscription-based TiVo service, which enhances home entertainment by providing consumers with a way to record, watch, and control live television, as well as to receive videos, pictures, and movies from cable, broadcast, and broadband sources in one interface. It also provides a platform for advertising and audience research measurement services.
7) Francesca's Holdings Corporation (FRAN)
|Industry:||Specialty Retail, Other|
Francesca's Holdings Corporation has a Return on Assets of 34.24% and Earnings Per Share Growth Rate of 25.85% and 5-Year Projected Earnings Per Share Growth Rate of 34.25%. The short interest was 10.55% as of 05/30/2012. Francesca's Holdings Corporation, through its subsidiary, Francesca's Collections, Inc., operates a chain of retail boutiques under the francesca's collections brand in the United States. Its retail boutiques offer apparel, jewelry, accessories, and gifts to female customers.
*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.