Even in traditional categories like industrial stocks there are opportunities to get in on companies with great expansion projections. This is especially true with small cap stocks. When looking for stocks in this range, it is important to keep in mind methods for minimizing risk. The strategy we employed today was to select industrial stocks that met the following criteria: considerable cash reserves and significant estimated growth. We arrived at an interesting list that is worthy of further research.
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).
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.
We first looked for small cap industrial stocks. Next, we then screened for businesses that have a substantial amount of cash on hand (Current Ratio>2)(Quick Ratio>2). From here, we then looked for companies with projected high growth, measured by 1-year projected EPS growth above 25%.
Do you think these small-cap stocks will go up in valuation? Please use our list to assist with your own analysis.
1) Aixtron SE (AIXG)
Aixtron SE has a Current Ratio of 4.52, a Quick Ratio of 2.89, and a 1-Year Projected Earnings Per Share Growth Rate of 323.10%. The short interest was 3.27% as of 07/30/2012. AIXTRON Aktiengesellschaft manufactures and sells deposition equipment to the semiconductor industry. Its solutions are used by a range of customers to build components for electronic and opto-electronic applications, which are used in displays, signaling, lighting, computing, fiber optic communication systems, wireless and mobile telephony applications, and optical and electronic storage devices. The company offers production and research scale deposition systems for silicon semiconductor market applications capable of depositing material films on wafers; and a range of peripheral equipment and services, including products capable of monitoring the concentration of gases in the air and of cleaning the exhaust gas from metal organic chemical vapor deposition processes.
2) Electro Scientific Industries Inc. (ESIO)
|Industry:||Industrial Electrical Equipment|
Electro Scientific Industries Inc. has a Current Ratio of 6.93, a Quick Ratio of 5.43, and a 1-Year Projected Earnings Per Share Growth Rate of 614.29%. The short interest was 2.48% as of 07/30/2012. Electro Scientific Industries, Inc., together with its subsidiaries, provides laser-based manufacturing solutions worldwide. The company's laser systems enable precise structuring of micron to submicron features in components and devices, which are used in various end products in the consumer electronics, computer, communications, and other industries. It offers semiconductor memory yield systems used to manufacture dynamic random access memory devices; traditional silicon wafers; ultrathin silicon wafers used in the three-dimensional packaging applications; sapphire wafer scribing systems used in manufacturing light emitting diodes (LEDS); and laser liquid crystal display repair systems to enhance yields in the manufacture of flat panel displays.
3) Louisiana-Pacific Corp. (LPX)
|Industry:||Lumber, Wood Production|
Louisiana-Pacific Corp. has a Current Ratio of 4.20, a Quick Ratio of 2.89, and a 1-Year Projected Earnings Per Share Growth Rate of 600.00%. The short interest was 16.14% as of 07/30/2012. Louisiana-Pacific Corporation, together with its subsidiaries, engages in manufacturing and distributing building products for new home construction, repair and remodeling, manufactured housing, and light industrial and commercial construction. The company's Oriented Strand Board segment provides structural panel products, such as plywood, including roof decking, sidewall sheathing, and floor underlayment. Its Siding segment offers SmartSide siding products and related accessories, including wood-based sidings, trim, soffit, and fascia; and Canexel siding and accessory products comprising pre-finished lap, panel, and trim products. The company's Engineered Wood Products segment offers I-joists, laminated veneer lumber, laminated strand lumber, and other related products for residential and commercial flooring and roofing systems, headers and beams, and other structural applications.
4) Mueller Industries Inc. (MLI)
Mueller Industries Inc. has a Current Ratio of 3.93, a Quick Ratio of 2.97, and a 1-Year Projected Earnings Per Share Growth Rate of 28.26%. The short interest was 1.95% as of 07/30/2012. Mueller Industries, Inc. engages in the manufacture and sale of copper, brass, plastic, and aluminum products in the United States, Canada, Mexico, Great Britain, and China. It operates in two segments, Plumbing and Refrigeration, and Original Equipment Manufacturers (OEM). The Plumbing and Refrigeration segment offers copper tubes in straight lengths and coils for plumbing applications; copper and plastic fittings, line sets, and related components for use in water distribution systems, heating systems, air-conditioning, and refrigeration applications, as well as for drainage, waste, and vent systems.
5) Proto Labs, Inc. (PRLB)
|Industry:||Machine Tools & Accessories|
Proto Labs, Inc. has a Current Ratio of 8.45, a Quick Ratio of 8.03, and a 1-Year Projected Earnings Per Share Growth Rate of 35.20%. The short interest was 48.86% as of 07/30/2012. Proto Labs, Inc. produces CNC machined and injection molded plastic parts. It offers products that are made of various engineering-grade resins, such as ABS, polycarbonate, nylon, acetal, polypropylene, acrylic, PBT, HDPE, LDPE, TPE, and TPU, as well as LCP, including glass or fiber filled grades. The company was founded in 1999 and is headquartered in Maple Plain, Minnesota.
6) Global Power Equipment Group Inc. (GLPW)
Global Power Equipment Group Inc. has a Current Ratio of 3.96, a Quick Ratio of 3.85, and a 1-Year Projected Earnings Per Share Growth Rate of 52.00%. The short interest was 7.14% as of 07/30/2012. Global Power Equipment Group Inc. and its subsidiaries designs, engineers, and manufactures gas turbine auxiliary equipment; and provides routine and specialty maintenance services to customers in the utility and industrial sectors. Its gas turbine auxiliary equipment include filter houses, inlet systems, exhaust systems, diverter dampers, selective catalytic emission reduction systems, packaged skids, and precision parts and specialty fabrications. These products are primarily used in the operation of gas turbine power plants, as well as for other industrial, energy, and power-related applications.
7) Simpson Manufacturing Co., Inc. (SSD)
|Industry:||Small Tools & Accessories|
Simpson Manufacturing Co., Inc. has a Current Ratio of 5.34, a Quick Ratio of 3.29, and a 1-Year Projected Earnings Per Share Growth Rate of 30.97%. The short interest was 3.41% as of 07/30/2012. Simpson Manufacturing Co., Inc., through its subsidiaries, engages in the design, engineering, manufacture, and sale of building products. It offers wood-to-wood, wood-to-concrete, and wood-to-masonry connectors; screw fastening systems and collated screws; stainless steel fasteners; pre-fabricated shear walls and moment-frames; truss plates; and a range of adhesives, chemicals, mechanical anchors, carbide drill bits, and powder-actuated tools for concrete, masonry, and steel markets, as well as a range of concrete repair products and engineered materials for the repair, strengthening, and restoration of asphalt and masonry construction. The company markets its products to the residential construction, light industrial and commercial construction, remodeling, and do-it-yourself markets primarily in the United States, Canada, Europe, Asia, and the South Pacific.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from FinViz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.