Small-cap companies can offer greater opportunities for gains, but they can also add a fair amount of risk to the equation. Focusing on small caps with reliable profitability is one tactic for minimizing their inherent risk, since it is profits that will sustain a company over time and fuel any potential long-term growth. Today, we are focusing on companies in this light, and we are narrowing in on those that also have received a vote of confidence from analysts. The list of small caps we came up with is varied, but pretty interesting at the same time.
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.
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. It also llets 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.
We first looked for small cap stocks. Next, we then screened for businesses that have strong profitability (1-year fiscal EPS Growth Rate>10%)(ROA [TTM]>10%). From here, we then looked for companies that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3). We did not screen out any sectors.
Do you think these small-cap stocks have higher to rise? Use our screened list as a starting point for your own analysis.
1) Virtus Investment Partners, Inc. (VRTS)
Virtus Investment Partners, Inc. has a Earnings Per Share Growth Rate of 1919.39%, a Return on Assets of 69.66%, and a Analysts' Rating of 2.00. The short interest was 4.80% as of 07/11/2012. Virtus Investment Partners, Inc. provides investment management products and services to individuals and institutions in the United States. The company operates a multi-manager asset management business, comprising various individual affiliated managers, each with its own investment style, autonomous investment process, and individual brand. It supplements the investment capabilities of its affiliated managers partnering with select unaffiliated sub-advisors whose strategies are not available to retail mutual fund customers.
2) Convergys Corporation (CVG)
|Industry:||Business Software & Services|
Convergys Corporation has a Earnings Per Share Growth Rate of 540.21%, a Return on Assets of 14.24%, and a Analysts' Rating of 1.80. The short interest was 7.70% as of 07/11/2012. Convergys Corporation provides relationship management solutions in North America and internationally. Its Customer Management segment offers agent-assisted, self-service, and intelligent technology care solutions, including customer service, customer retention, sales, technical support, social interaction, collections management, back office, business-to-business, customer experience applied analytics, and intelligent interaction solutions for communications, financial services, technology, retail, healthcare, and government markets. This segment also provides premise-based and hosted automated self-care and technology solutions; speech recognition solutions; and license, professional, consulting and maintenance, and software support services.
3) Zygo Corporation (ZIGO)
|Industry:||Scientific & Technical Instruments|
Zygo Corporation has a Earnings Per Share Growth Rate of 596.17%, a Return on Assets of 15.88%, and a Analysts' Rating of 1.00. The short interest was 3.34% as of 07/11/2012. Zygo Corporation designs, develops, and manufactures ultra-high precision measurement solutions to enhance its customers' manufacturing yields, and optical sub-systems and components for original equipment manufacturer and end-user applications in the Americas, the Far East, and Europe. It operates in two segments, Metrology Solutions and Optical Systems. The Metrology Solutions segment offers 3-Dimensional surface metrology products, precision positioning systems, and custom engineered solutions that are used to measure surface characteristics and critical parameters, including topography and roughness, shape, dimension, thickness, optical characteristics, and defects.
4) Navistar International Corporation (NAV)
|Industry:||Trucks & Other Vehicles|
Navistar International Corporation has a Earnings Per Share Growth Rate of 643.20%, a Return on Assets of 12.95%, and a Analysts' Rating of 2.30. The short interest was 11.14% as of 07/11/2012. Navistar International Corporation, through its subsidiaries, manufactures and sells commercial and military trucks, buses, diesel engines, recreational vehicles (RVs), and chassis, as well as provides service parts for trucks and trailers. It operates in four segments: Truck, Engine, Parts, and Financial Services. The Truck segment manufactures and distributes trucks and buses for the common carrier, private carrier, government/service, leasing, construction, energy/petroleum, military vehicles, and student and commercial transportation markets under the International and IC brands.
5) Constant Contact, Inc. (CTCT)
Constant Contact, Inc. has a Earnings Per Share Growth Rate of 693.37%, a Return on Assets of 12.63%, and a Analysts' Rating of 2.20. The short interest was 28.40% as of 07/11/2012. 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) Bravo Brio Restaurant Group, Inc. (BBRG)
Bravo Brio Restaurant Group, Inc. has a Earnings Per Share Growth Rate of 790.62%, a Return on Assets of 36.59%, and a Analysts' Rating of 1.80. The short interest was 6.45% as of 07/11/2012. Bravo Brio Restaurant Group, Inc. owns and operates Italian restaurant brands in the United States. Its brands include BRAVO! Cucina Italiana, and BRIO Tuscan Grille. The company also operates an American-French bistro restaurant under the brand Bon Vie.
7) Rosetta Resources, Inc. (ROSE)
|Industry:||Independent Oil & Gas|
Rosetta Resources, Inc. has a Earnings Per Share Growth Rate of 423.42%, a Return on Assets of 10.59%, and a Analysts' Rating of 2.40. The short interest was 7.00% as of 07/11/2012. Rosetta Resources Inc., an independent exploration and production company, engages in the acquisition, exploration, development, and production of onshore oil and gas resources in the United States. It owns producing and non-producing oil and gas properties located primarily in South Texas, including the Eagle Ford, and in the Southern Alberta Basin in Northwest Montana. As of December 31, 2011, the company had an estimated 965 billion cubic feet equivalent of proved reserves, including 36,370 million barrels of oil, 50,219 million barrels of natural gas liquids, and 446 billion cubic feet of natural gas, as well as drilled 53 net wells.
*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.