Interested in following smaller tech companies? In the case of small cap tech stocks, you have greater risk, but you also might have the next Google or Apple on your hands. One promising place to search for small cap tech stocks is to look for companies that have both solid sources of profitability as well as strong growth projections over the next year. We ran a screen keeping this idea in mind.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. The 1-Year Expected EPS Growth Rate is an annual growth estimate, where the growth projections are made by analysts, the company or other credible sources.
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.
We first looked for small cap technology stocks. We then looked for businesses with projected high growth, measured by 1-year projected EPS growth above 25%. Next, we then screened for businesses with strong profit margins (1-year operating margin>15%)(1-year fiscal EPS growth rate>10%).
Do you think these small-cap stocks have more value to price in? Use our list along with your own analysis.
1) ADTRAN Inc. (NASDAQ:ADTN)
ADTRAN Inc. has a 1-Year Projected Earnings Per Share Growth Rate of 39.49%, a Operating Profit Margin of 23.27%, and a Earnings Per Share Growth Rate of 18.71%. The short interest was 9.61% as of 06/21/2012. 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) InvenSense, Inc. (NYSE:INVN)
|Industry:||Semiconductor Equipment & Materials|
InvenSense, Inc. has a 1-Year Projected Earnings Per Share Growth Rate of 39.34%, a Operating Profit Margin of 30.74%, and a Earnings Per Share Growth Rate of 1713.57%. The short interest was 10.02% as of 06/21/2012. InvenSense, Inc. designs, develops, markets, and sells micro-electro-mechanical systems (MEMS) gyroscopes for motion processing solutions in consumer electronics. The company delivers next-generation motion processing based on its advanced multi-axis gyroscope technology by targeting applications in video game devices, handsets and tablet devices, digital still and video cameras, digital television and set-top box remote controls, 3D mice, portable navigation devices, and household consumer and industrial devices. Its products include MotionProcessing units (MPUs) and inertial measurement units (IMUs), which enable three-axis and six-axis functionality by integrating multiple sensors, as well as advanced DigitalMotion processor (DMP) functionality.
3) Spansion Inc. (CODE)
|Industry:||Semiconductor- Memory Chips|
Spansion Inc. has a 1-Year Projected Earnings Per Share Growth Rate of 81.72%, a Operating Profit Margin of 25.54%, and a Earnings Per Share Growth Rate of 238.98%. The short interest was 5.06% as of 06/21/2012. Spansion Inc. engages in the design, development, manufacture, and sale of flash memory semiconductors worldwide. It offers flash memory solutions for microprocessors, controllers, and other programmable semiconductors that run applications in a range of electronic systems, including automotive and industrial, computing and communications, and consumer and gaming. The company's product designs are primarily based on its proprietary two-bit-per-cell MirrorBit technology.
*Company profiles were sourced from Finviz. Financial data was sourced from Google Finance and Yahoo Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.