For investors who like to move in on a stock before everyone else, small-caps can offer a trove of opportunities. After all, by definition these stocks still have room for growth. To find the most promising small cap stocks to consider, we looked for two key components - strong projected growth on the horizon, and above-average levels of cash reserves. If stocks with these traits pique your interest, then the ones we uncovered will be up your alley.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. The 5-Year Expected EPS Growth Rate is a long term 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. From here, we then looked for companies that are considered high-growth, with 5-year projected EPS growth above 25%. From here, we then looked for companies that have strong liquidity (Current Ratio>2)(Quick Ratio>2). We did not screen out any sectors.
Do you think these small-cap stocks are worth more than the market currently says? Use this list as a starting-off point for your own analysis.
1) Comtech Telecommunications Corp. (CMTL)
Comtech Telecommunications Corp. has a 5-Year Projected Earnings Per Share Growth Rate of 35.00%, a Current Ratio of 6.58, and a Quick Ratio of 5.65. The short interest was 8.63% as of 08/06/2012. Comtech Telecommunications Corp. designs, develops, produces, and markets products, systems, and services for communications solutions in the United States and internationally. The company's Telecommunications Transmission segment provides satellite earth station equipment and systems, such as satellite earth station modems, block up converters, power amplifiers, transceivers, access devices, voice gateways, IP encapsulators, and media routers. This segment also offers over-the-horizon microwave equipment and systems that transmit voice, video, and data, as well as markets data compression integrated circuits.
2) Teavana Holdings, Inc. (TEA)
Teavana Holdings, Inc. has a 5-Year Projected Earnings Per Share Growth Rate of 31.67%, a Current Ratio of 4.53, and a Quick Ratio of 2.45. The short interest was 15.51% as of 08/06/2012. Teavana Holdings, Inc., together with its subsidiaries, operates as a specialty retailer of loose-leaf teas, tea wares, and other tea-related merchandise in the United States, Canada, and Mexico. The company offers approximately 100 varieties of loose-leaf teas; and a selection of fresh-brewed teas. It also provides tea wares and other tea-related merchandise, such as handcrafted cast-iron, clay, and ceramic tea pots; tea cups and mugs; tea accessories; tea dcor and media products; and tea foods.
3) Silicon Image, Inc. (SIMG)
|Industry:||Semiconductor - Broad Line|
Silicon Image, Inc. has a 5-Year Projected Earnings Per Share Growth Rate of 40.00%, a Current Ratio of 3.69, and a Quick Ratio of 3.39. The short interest was 4.31% as of 08/06/2012. Silicon Image, Inc. provides wireless and wired connectivity solutions that enable the distribution and presentation of high-definition (HD) content for mobile, consumer electronics (CE), and personal computer (PC) markets. The company delivers its technology via semiconductor and intellectual property products and services. It offers high-definition multimedia interface (HDMI) and mobile high-definition link (MHL) transmitters for mobile devices, such as smartphones and tablets; and MHL-to-HDMI bridges for docking stations and adapters connecting MHL mobile products with HDMI-enabled digital televisions (DTVs) and displays.
4) Clean Energy Fuels Corp. (CLNE)
Clean Energy Fuels Corp. has a 5-Year Projected Earnings Per Share Growth Rate of 31.20%, a Current Ratio of 3.20, and a Quick Ratio of 2.86. The short interest was 30.75% as of 08/06/2012. Clean Energy Fuels Corp., together with its subsidiaries, provides natural gas as an alternative fuel for vehicle fleets in the United States and Canada. The company designs, builds, operates, and maintains fueling stations, as well as supplies compressed natural gas (CNG) and liquefied natural gas (LNG) fuel for medium and heavy-duty vehicles. Its CNG is used in automobiles, light to medium-duty vehicles, refuse trucks, and transit buses as an alternative to gasoline and diesel.
5) TiVo Inc. (TIVO)
TiVo Inc. has a 5-Year Projected Earnings Per Share Growth Rate of 40.00%, a Current Ratio of 4.50, and a Quick Ratio of 4.30. The short interest was 9.29% as of 08/06/2012. TiVo Inc., together with its subsidiaries, provides technology and services for television solutions, including digital video recorders (DVRs) and connected televisions in the United States and internationally. The company offers subscription-based TiVo service, which enhances home entertainment by providing consumers with a way to record, watch, and control live television, as well as to receive videos, pictures, and movies from cable, broadcast, and broadband sources in one interface. It also provides a platform for advertising and audience research measurement services.
6) Syneron Medical Ltd. (ELOS)
|Industry:||Medical Appliances & Equipment|
Syneron Medical Ltd. has a 5-Year Projected Earnings Per Share Growth Rate of 35.00%, a Current Ratio of 3.05, and a Quick Ratio of 2.61. The short interest was 0.69% as of 08/06/2012. Syneron Medical Ltd., together with its subsidiaries, engages in the research, manufacture, development, marketing, and sale of aesthetic medical products worldwide. It develops products based on its proprietary Electro-Optical Synergy technology, which uses the synergy between electrical energy and optical energy to provide aesthetic medical treatments. The company's products target a range of non-invasive aesthetic medical procedures, including hair removal, wrinkle reduction, rejuvenation of the skin's appearance through the treatment of superficial benign vascular and pigmented lesions, acne treatment, treatment of leg veins, treatment for the temporary reduction in the appearance of cellulite and thigh circumference, ablation and resurfacing of the skin and laser-assisted lipolysis, and skin cooling, as well as relieving aches, pains, and stiffness in muscles.
7) CARBO Ceramics Inc. (CRR)
|Industry:||Oil & Gas Equipment & Services|
CARBO Ceramics Inc. has a 5-Year Projected Earnings Per Share Growth Rate of 35.20%, a Current Ratio of 5.99, and a Quick Ratio of 3.37. The short interest was 28.49% as of 08/06/2012. CARBO Ceramics Inc. manufactures and supplies resin-coated ceramic and resin-coated sand proppants primarily used in the hydraulic fracturing of natural gas and oil wells in the United States and internationally. The company offers proppants, including CARBOHSP and CARBOPROP designed for use in deep gas wells; CARBOLITE used in medium depth oil and gas wells; CARBOECONOPROP; CARBOHYDROPROP used to enhance performance in slickwater fracture treatments; CARBOBOND LITE for oil and natural gas wells that are subject to the risk of proppant flow-back; and CARBOBOND RCS, a conductivity proppant. It also provides fracture simulation software, as well as offers fracture design, engineering, and consulting services to oil and natural gas companies.
*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.