Small-cap stocks tend to offer investors greater growth opportunities than large-cap alternatives, although this comes with its fair share of added risk. It's especially true for technology stocks. One differentiator for technology stocks is how much money is sitting in the bank. A well funded tech company can use cash to make strategic acquisitions, invest in innovative products, or use it to weather possible financial storms. Focusing on companies with these traits, we ran a screen that produced a very interesting list worth checking out.
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/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 let's an investor know how much the investment community is willing to pay for every dollars 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 dollars 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 to be clear. Price/Sales Ratio = Current Stock Price/Revenue (sales) per Share
The Price/Book Value Ratio is a great price-multiple valuation metric to find companies that could be potentially undervalued or overvalued. If a firm has a Price/Book Value Ratio of less than 1 it is stated to be trading below "break up" value. A lower P/BV Ratio can indicate a potentially mispriced company or indicate that something is fundamentally wrong with it.
We first looked for small cap technology stocks. We then screened for businesses that have strong liquidity (Current Ratio>2)(Quick Ratio>2). From here, we then looked for companies that are trading at a discount (P/S<1)(P/BV<1).
Do you think these small-cap stocks have strong operations? Use our list along with your own analysis.
1) NII Holdings Inc. (NIHD)
NII Holdings Inc. has a Current Ratio of 2.19 and Quick Ratio of 2.04 and Price/Sales Ratio of 0.28 and Price/Book Value Ratio of 0.56. The short interest was 12.51% as of 06/05/2012. NII Holdings, Inc., through its subsidiaries, provides wireless communication services under the Nextel brand name to businesses and individuals in Mexico, Brazil, Argentina, Peru, and Chile. Its services include mobile telephone service; Nextel Direct Connect service, which allows subscribers to talk to each other on a push-to-talk basis for private one-to-one calls or on group calls. The company also provides value-added services, including text messaging services; mobile Internet services; e-mail services; location-based services, such as the use of global positioning system technologies; digital media services; and a set of applications available via its content management system and the Android open application market.
2) Photronics Inc. (PLAB)
|Industry:||Semiconductor - Integrated Circuits|
Photronics Inc. has a Current Ratio of 3.47 and Quick Ratio of 3.24 and Price/Sales Ratio of 0.69 and Price/Book Value Ratio of 0.59. The short interest was 12.77% as of 06/05/2012. Photronics, Inc. engages in the manufacture and sale of photomasks primarily in the United States, Europe, and Asia. Photomasks are high precision photographic quartz plates containing microscopic images of electronic circuits, which are used in the manufacture of semiconductors and flat panel displays; and used as masters to transfer circuit patterns onto semiconductor wafers and flat panel substrates during the fabrication of integrated circuits, various flat panel displays, and other types of electrical and optical components. The company sells its photomasks to semiconductor designers, manufacturers, foundries, and other high performance electronics manufacturers through its sales personnel and customer service representatives.
3) TriQuint Semiconductor, Inc. (TQNT)
|Industry:||Semiconductor - Integrated Circuits|
TriQuint Semiconductor, Inc. has a Current Ratio of 5.07 and Quick Ratio of 3.63 and Price/Sales Ratio of 0.97 and Price/Book Value Ratio of 0.90. The short interest was 11.89% as of 06/05/2012. TriQuint Semiconductor, Inc. provides radio frequency (RF) solutions and technology for communications, defense, and aerospace companies worldwide. The company designs, develops, and manufactures RF solutions with gallium arsenide (GaAs), gallium nitride, bipolar high electron mobility transistor, surface acoustic wave (SAW), temperature compensated surface acoustic wave, bulk acoustic wave (BAW), copper flip, and wafer level packaging technologies. The company offers an array of filtering, switching, and amplification products for RF, microwave, and millimeter-wave applications.
4) OmniVision Technologies Inc. (OVTI)
|Industry:||Semiconductor - Integrated Circuits|
OmniVision Technologies Inc. has a Current Ratio of 6.20 and Quick Ratio of 3.75 and Price/Sales Ratio of 0.74 and Price/Book Value Ratio of 0.92. The short interest was 15.72% as of 06/05/2012. OmniVision Technologies, Inc. engages in designing, developing, and marketing semiconductor image-sensor devices worldwide. The company primarily offers CameraChip image sensors, which are single-chip solutions that integrate various functions, such as image capture, image processing, color processing, signal conversion, and output of a processed image or video stream for use in various consumer and commercial mass-market applications; and CameraCube imaging devices that are image sensors with integrated wafer-level optics. It also provides companion chips used to connect its image sensors to various interfaces, including the universal serial bus and other industry standard interfaces; and companion digital signal processors that perform compression in standardized still photo and digital video formats.
5) Benchmark Electronics Inc. (BHE)
|Industry:||Printed Circuit Boards|
Benchmark Electronics Inc. has a Current Ratio of 3.33 and Quick Ratio of 2.23 and Price/Sales Ratio of 0.32 and Price/Book Value Ratio of 0.67. The short interest was 3.09% as of 06/05/2012. Benchmark Electronics, Inc. provides electronics manufacturing services in the Americas, Asia, and Europe. The company provides engineering solutions, such as new product design, prototype, test, and related engineering solutions; and custom test, and automation equipment design and build solutions. It also offers manufacturing and fulfillment solutions, including printed circuit board assembly, assembly of subsystems, circuitry and functionality testing of printed assemblies, environmental and stress testing, and component reliability testing; flex circuit assembly and test solutions; and systems assembly and test solutions, as well as environmental stress tests of assemblies of boards or systems.
6) Harmonic Inc. (HLIT)
Harmonic Inc. has a Current Ratio of 3.68 and Quick Ratio of 3.07 and Price/Sales Ratio of 0.73 and Price/Book Value Ratio of 0.87. The short interest was 2.86% as of 06/05/2012. Harmonic Inc. designs, manufactures, and sells video infrastructure products and system solutions to create, prepare, and deliver a range of video services for television and media platforms in the united States and internationally. Its products include video production platforms and playout solutions, such as video servers used by broadcasters, content owners, and multi-channel network operators to create and play-to-air television channels; video-optimized storage, which provides storage capacity and access bandwidth to support media production applications comprising video editing, content transformation, and media library management; and media applications that provide media integrated management and workflow control over content stored on its systems. The company offers video processing products, including broadcast encoders; contribution and distribution encoders; stream processing and statistical multiplexing solutions; content preparation and delivery for multi-screen applications; decoders and descramblers; and management and control software.
7) Vishay Intertechnology Inc. (VSH)
|Industry:||Semiconductor - Broad Line|
Vishay Intertechnology Inc. has a Current Ratio of 4.38 and Quick Ratio of 3.30 and Price/Sales Ratio of 0.66 and Price/Book Value Ratio of 0.97. The short interest was 4.72% as of 06/05/2012. Vishay Intertechnology, Inc. designs, manufactures, and supplies discrete semiconductors and passive components in the United States and internationally. The company's semiconductor products include MOSFETs, such as low-and medium-voltage TrenchFET MOSFETs, high-voltage planar MOSFETs, high voltage Super Junction MOSFETs, power integrated circuits, and integrated function power devices; diodes comprising rectifiers, small signal diodes, protection diodes, thyristors/silicon-controlled rectifiers, and power modules; and optoelectronic components, including infrared (IR) emitters and detectors, IR remote control receivers, optocouplers, solid-state relays, optical sensors, light-emitting diodes, seven-segment displays, and IR data transceiver modules. These semiconductor components are used for various functions, including power control, power conversion, power management, signal switching, signal routing, signal blocking, signal amplification, two-way data transfer, one-way remote control, and circuit isolation.
*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.