If you are a person who notices trends before everyone else catches on, it is likely that you keep informed about small cap companies. Here is where we see the greatest potential in terms of investment growth. On the flip side, there is usually an increased amount of risk because these companies are still in the proving ground and may not have worked out all the kinks. To find the most promising small caps we screened for two key factors—an analyst rating of 'Strong Buy' and generous levels of cash reserves. If stocks with these traits pique your interest, you will probably like the list of consumer companies that we came up with today.
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 consumer stocks. Next, we then screened for businesses that have a substantial amount of cash on hand (Current Ratio>2)(Quick Ratio>2). We next screened for businesses that analysts rate as "Strong Buy" (mean recommendation < 2).
Do you think these small-cap stocks will offer healthy returns? Use this list as a starting-off point for your own analysis.
1) Dorman Products, Inc. (DORM)
Dorman Products, Inc. has a Current Ratio of 6.30, a Quick Ratio of 3.82, and an Analysts' Rating of 1.00. The short interest was 4.70% as of August 6, 2012. Dorman Products, Inc. supplies automotive replacement parts, fasteners, and service line products primarily for the automotive aftermarket. The company offers approximately 128,000 products comprising original equipment dealer parts, which include intake manifolds, exhaust manifolds, oil cooler lines, window regulators, radiator fan assemblies, power steering pulleys, and harmonic balancers; and replacement parts, such as window handles and switches, door hardware, interior trim parts, headlamp aiming screws and retainer rings, radiator parts, battery hold-down bolts and repair kits, valve train parts, and power steering filler caps.
It also provides application specific and general automotive hardware, such as body hardware, general automotive fasteners, oil drain plugs, and wheel hardware; a selection of electrical connectors, wires, tools, testers, and accessories; and a line of home hardware and home organization products designed for retail merchandisers.
2) Movado Group, Inc. (MOV)
|Industry:||Recreational Goods, Other|
Movado Group, Inc. has a Current Ratio of 5.76, a Quick Ratio of 3.41, and an Analysts' Rating of 1.00. The short interest was 8.09% as of August 6, 2012. Movado Group, Inc. designs, sources, markets, and distributes fine watches. It offers its watches under the Movado, Ebel, Concord, ESQ by Movado, Coach, HUGO BOSS, Juicy Couture, Tommy Hilfiger, Lacoste, and Ferrari brands. The company is also involved in the after-sales service activities and shipping.
3) Buckeye Technologies Inc. (BKI)
|Industry:||Paper & Paper Products|
Buckeye Technologies Inc. has a Current Ratio of 3.89, a Quick Ratio of 2.56, and an Analysts' Rating of 1.50. The short interest was 3.01% as of August 6, 2012. Buckeye Technologies Inc. engages in the manufacture and distribution of cellulose-based specialty products. It operates in two segments, Specialty Fibers and Nonwoven Materials. The Specialty Fibers segment offers chemical cellulose, customized fibers, and fluff pulp derived from wood and cotton cellulose materials using wetlaid technology.
4) La-Z-Boy Inc. (LZB)
|Industry:||Home Furnishings & Fixtures|
La-Z-Boy Inc. has a Current Ratio of 3.34, a Quick Ratio of 2.38, and an Analysts' Rating of 1.20. The short interest was 5.93% as of August 6, 2012. La-Z-Boy Incorporated manufactures, markets, imports, distributes, and retails upholstery products, accessories, and casegoods furniture products under the La-Z-Boy brand name primarily in the United States and Canada.
It operates in three segments: Upholstery, Casegoods, and Retail. The Upholstery segment manufactures, imports, and sells upholstered furniture, such as recliners and motion furniture, sofas, loveseats, chairs, ottomans, and sleeper sofas directly to La-Z-Boy Furniture Galleries stores, operators of Comfort Studios, dealers, and other independent retailers. The Casegoods segment manufactures, imports, markets, and distributes casegoods furniture, including bedroom sets, dining room sets, entertainment centers, and accent pieces, as well as coordinated upholstered furniture primarily to dealers and other independent retailers.
5) Titan International Inc. (TWI)
|Industry:||Rubber & Plastics|
Titan International Inc. has a Current Ratio of 3.57, a Quick Ratio of 2.43, and an Analysts' Rating of 1.50. The short interest was 28.99% as of August 6, 2012. Titan International, Inc. and its subsidiaries manufacture and sell wheels, tires, and assemblies for off-highway vehicles used in the agricultural, earthmoving/construction, and consumer markets in the United States.
It offers rims, wheels, and tires for use on various agricultural and forestry equipment, including tractors, combines, skidders, plows, planters, and irrigation equipment. The company also provides rims, wheels, and tires for various off-the-road earthmoving, mining, military, and construction equipment, including skid steers, aerial lifts, cranes, graders and levelers, scrapers, self-propelled shovel loaders, articulated dump trucks, load transporters, haul trucks, and backhoe loaders.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz.