Small-cap stocks can offer investors significant growth potential for their portfolios, but can also heighten levels of risk. One strategy for reducing that risk is to seek out small caps that are projected to grow over the long term. Keeping this in mind, we focused on small caps that not only have strong growth projections, but also have ample cash reserves to fund their growth. We compiled a short list of stocks that are worthy of more research.
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 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. We then looked for companies that have expected earnings per share growth of more than 25 percent for next year (one-year projected EPS Growth Rate>25%). We then looked for businesses that have a substantial 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 should be priced higher? Use this list as a starting-off point for your own analysis.
1) Tellabs, Inc. (TLAB)
Tellabs Inc. has a 1-Year Projected Earnings Per Share Growth Rate of 800.00%, a Current Ratio of 3.08, and a Quick Ratio of 2.83. The short interest was 4.64% as of June 22, 2012. Tellabs, Inc. designs, develops, and supports telecommunications networking products for communication service providers in the United States and internationally. Its products and services enable customers to deliver wireless and wireline voice, data, and video services to business and residential customers. The company operates through three segments: Broadband, Transport, and Services.
2) TriQuint Semiconductor, Inc. (TQNT)
|Industry:||Semiconductor - Integrated Circuits|
TriQuint Semiconductor, Inc. has a 1-Year Projected Earnings Per Share Growth Rate of 3100.00%, a Current Ratio of 5.07, and a Quick Ratio of 3.63. The short interest was 11.24% as of 07/22/2012. 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.
3) Quidel Corporation (QDEL)
Quidel Corp. has a 1-Year Projected Earnings Per Share Growth Rate of 950.00%, a Current Ratio of 4.44, and a Quick Ratio of 3.38. The short interest was 18.92% as of June 22, 2012. Quidel Corporation develops, manufactures, and markets diagnostic testing solutions for applications in infectious diseases, women's health, and gastrointestinal diseases.
The company's products for infectious diseases include QuickVue influenza test to detect viral antigens of influenza type A and B; QuickVue Strep A tests to detect Group A Streptococcal antigen from throat swabs or confirmation of presumptive Group A Streptococcal colonies recovered from culture; QuickVue RSV test, a rapid immunoassay for respiratory syncitial virus; cell culture and DFA detection solutions to detect seven viral respiratory pathogens.
It also offers cell-based products in various formats, including tubes, shell vials, and multi-well plates to culture and test for human viruses; ELVIS HSV system for the isolation and detection of herpes simplex virus (HSV) types 1 and 2; and a multiplex cell culture solution to isolate HSV, varicella zoster virus, and cytomegalovirus, as well as sells various analyzers and molecular assays.
The company's products for women's health consist of QuickVue and RapidVue pregnancy tests to detect human chorionic gonoadotropin in serum or urine for the early detection of pregnancy; Thyretain for the diagnosis of graves, an autoimmune disease; QuickVue Chlamydia test to detect chlamydia trachomatis from endocervical swab and cytology brush specimens; and clinical and research products for the assessment of osteoporosis and the evaluation of bone resorption/formation, including metabolic bone markers to monitor the effectiveness of therapy in pharmaceutical and related research.
4) CIENA Corporation (CIEN)
CIENA Corp. has a 1-Year Projected Earnings Per Share Growth Rate of 2700.00%, a Current Ratio of 2.91, and a Quick Ratio of 2.40. The short interest was 25.83% as of June 22, 2012. Ciena Corporation provides equipment, software, and service solutions that support the transport, switching, aggregation, and management of voice, video, and data traffic on communications networks worldwide.
Its product portfolio consists of packet-optical transport that includes optical transport solutions to increase network capacity and enable delivery of a broader mix of high-bandwidth services; and packet-optical switching, which comprise optical switching platforms incorporating multi-service and multi-protocol switching systems that enable automated optical infrastructures for the delivery of various enterprise and consumer-oriented network services.
The company also offers carrier Ethernet solutions, including service delivery switches and service aggregation switches to support the access and aggregation tiers of communications networks, as well as to support wireless backhaul infrastructures and business data services; and software solutions to track individual services across multiple product suites, facilitating planned network maintenance, outage detection, and identification of customers or services affected by network troubles. In addition, Ciena Corporation provides consulting and support services, such as project management, deployment, maintenance support, consulting, and training services, as well as network analysis, planning, design, optimization, and tuning.
5) Tessera Technologies, Inc. (TSRA)
|Industry:||Semiconductor Equipment & Materials|
Tessera Technologies Inc. has a 1-Year Projected Earnings Per Share Growth Rate of 4500.00%, a Current Ratio of 14.99, and a Quick Ratio of 14.94. The short interest was 4.20% as of June 22, 2012. Tessera Technologies, Inc., through its subsidiaries, develops, licenses, and delivers miniaturization technologies and products for electronic devices worldwide. The company operates in two segments, Intellectual Property and DigitalOptics. The Intellectual Property segment offers semiconductor packaging technologies, which create mechanical and electrical connection between semiconductor chips and systems, such as computers and communication equipments through connection to printed circuit boards.
6) Halcon Resources Corporation (HK)
|Industry:||Oil & Gas Drilling & Exploration|
Halcon Resources Corporation has a 1-Year Projected Earnings Per Share Growth Rate of 3300.00%, a Current Ratio of 29.52, and a Quick Ratio of 29.34. The short interest was 16.43% as of June 22, 2012. Halcon Resources Corporation, an independent energy company, engages in the acquisition, production, exploration, and development of onshore oil and natural gas properties in the United States. The company holds its interests in Electra/Burkburnett fields located in Wichita and Wilbarger Counties, Texas; Northeast Fitts and Allen fields in Oklahoma; and various fields in Louisiana.
*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.