Seeking Alpha
Value
Profile| Send Message|
( followers)  

It is not surprising that many smaller companies accrue debt in the process of growing the business. After all, building from the ground up usually takes more time than originally anticipated. More time usually means additional expenses. So when a small cap level company is relatively debt free and is growing steadily, it sends a positive message that effective management is at the helm. With this in mind, we developed a list of small-cap stocks with minimal debt and EPS growth rates above 25% for the next five years. If these traits appeal to you, then you will like our list of small-cap stocks.

The Debt/Equity Ratio illustrates how aggressively a company is financing its growth via debt. The more debt financing that is used in a capital structure, the more volatile earnings can become due to the additional interest expense. Should a company's potentially enhanced earnings fail to exceed the cost associated with debt financing over time, this can lead the company toward substantial trouble.

The Long-Term Debt/Equity Ratio is a variation of the traditional debt-to-equity ratio; this value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios.

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.

We first looked for small-cap stocks. We then screened for businesses that operate with little to no debt (D/E Ratio < 0.1). We then looked for companies that have maintained a sound long-term capital structure (Long-Term D/E Ratio < 0.1). From here, we then looked for companies that have expected earnings per share growth of more than 25 percent for the next five years (5-year projected EPS Growth Rate > 25%). We did not screen out any sectors.

Do you think these small-cap stocks will go up in price? Please use our list to assist with your own analysis.

1) EXFO Electro-Optical Engineering Inc. (NASDAQ:EXFO)

SectorTechnology
IndustryCommunication Equipment
Market Cap$308.91M
Beta1.16

EXFO stock chart

Key Metrics

Debt/Equity Ratio0.00
Long Term Debt/Equity Ratio0.00
5-Year Projected Earnings Per Share Growth Rate25.50%
Short Interest0.25%

EXFO Electro-Optical Engineering Inc. designs, manufactures, and markets test and service assurance solutions for network service providers (NSPs) and equipment manufacturers in the telecommunications industry worldwide. The company's Telecom division principally offers AXS-200 SharpTESTER, a multi-service, multi-medium handheld test platform for characterizing and troubleshooting commercial and residential access networks; FTB-200 Compact Platform, a two-slot portable test unit for multi-technology, multi-application characterization of metro and access networks; FTB-500 that provides NSPs with a way to perform multiple, advanced test operations for installation, maintenance, and troubleshooting applications; and IQS-600 platform for manufacturing, and research and development applications. This division also offers service assurance and performance monitoring systems for advanced IP and carrier Ethernet services, as well as network monitoring systems and test probes used in third-party network monitoring solutions. Its customers include NSPs, cable television companies, public utilities, private network operators, third-party installers, equipment rental companies, large enterprises, network equipment manufacturers, component vendors, and laboratory researchers. The company's Life Sciences and Industrial division provides solutions in medical-device and opto-electronics assembly, fluorescence microscopy, and other life sciences sectors. Its customers consist of major manufacturers of medical devices, microelectronics, optical displays, electronic storage systems, photonic components, and microscopes, as well as universities, medical schools, governments, and private and industrial research laboratories. EXFO sells its products through its direct sales force, as well as through channel partners, such as sales representatives and distributors. The company was founded in 1985 and is headquartered in Quebec, Canada.

2) Bona Film Group Limited (NASDAQ:BONA)

SectorServices
IndustryEntertainment - Diversified
Market Cap$343.52M
Beta-

BONA stock chart

Key Metrics

Debt/Equity Ratio0.09
Long Term Debt/Equity Ratio0.00
5-Year Projected Earnings Per Share Growth Rate45.47%
Short Interest0.10%

Bona Film Group Limited engages in the distribution of films in the People's Republic of China and internationally. Its film distribution activities include film sourcing, which comprises identifying film projects with commercial potential and securing film distribution rights; print and marketing that includes coordinating the distribution of film prints to theater circuits, as well as conducting marketing and publicity campaigns to promote the films to their target audiences; exhibition, which comprises negotiating the terms of exhibitions of films in domestic and international movie theaters, as well as through non-theatrical distribution channels; and film advertising that includes the sale of advertising time immediately prior to the start of the theatrical screening of a film, in-film product placements, and cross-promotion campaigns. The company is also involved in the film investment and production, television production, and movie theater operation activities; and provision of talent agency services to artists. As of March 1, 2012, it owned and operated 11 movie theaters. Bona Film Group Limited was founded in 2003 and is headquartered in Beijing, the People's Republic of China.

3) MakeMyTrip Limited (NASDAQ:MMYT)

SectorServices
IndustryGeneral Entertainment
Market Cap$587.87M
Beta-

MMYT stock chart

Key Metrics

Debt/Equity Ratio0.00
Long Term Debt/Equity Ratio0.00
5-Year Projected Earnings Per Share Growth Rate44.93%
Short Interest2.47%

MakeMyTrip Limited, an online travel company, provides travel products and solutions in India and the United States. Its products and services include air tickets, hotels, packages, rail tickets, bus tickets, car hire, and ancillary travel requirements, such as travel insurance and visa processing. The company, through its Website, makemytrip.com, allow travelers to research, plan, book, and purchase a range of travel services and products in India and internationally. MakeMyTrip Limited also provides its products and services through other technology-enhanced distribution channels, such as call centers, travel stores, travel agents' network, and mobile service platform. Its customers comprise leisure travelers and small businesses. The company was formerly known as International Web Travel Private Limited and changed its name to MakeMyTrip Limited in April 2010. MakeMyTrip Limited was founded in 2000 and is headquartered in Gurgaon, India.

4) Acacia Research Corporation (NASDAQ:ACTG)

SectorServices
IndustryResearch Services
Market Cap$1.22B
Beta1.23

ACTG stock chart

Key Metrics

Debt/Equity Ratio0.00
Long Term Debt/Equity Ratio0.00
5-Year Projected Earnings Per Share Growth Rate38.00%
Short Interest6.36%

Acacia Research Corporation, through its subsidiaries, acquires, develops, licenses, and enforces patented technologies in the United States. It assists patent owners with the prosecution and development of their patent portfolios; protection of their patented inventions from unauthorized use; generation of licensing revenue from users of their patented technologies; and enforcement against unauthorized users of their patented technologies. The company owns or controls the rights to approximately 200 patent portfolios, which include the United State's patents and foreign counterparts covering technologies used in various industries. Acacia Research Corporation was founded in 1992 and is based in Newport Beach, California.

5) Kimball International, Inc. (NASDAQ:KBALB)

SectorTechnology
IndustryPrinted Circuit Boards
Market Cap$426.00M
Beta1.41

KBALB stock chart

Key Metrics

Debt/Equity Ratio0.00
Long Term Debt/Equity Ratio0.00
5-Year Projected Earnings Per Share Growth Rate27.70%
Short Interest2.97%

Kimball International, Inc. manufactures and sells electronic assemblies and furniture in the United States, Poland, the United Kingdom, and internationally. The company operates in two segments, Electronic Manufacturing Services (EMS) and Furniture. The EMS segment produces electronic assemblies, circuit boards, and wiring harnesses for electronic organs and keyboards. Its engineering and manufacturing services include the production and testing of printed circuit board assemblies; industrialization and automation of the manufacturing processes; product and process validation and qualification; testing of products under a series of harsh conditions; assembly and packaging of electronic and other related products; and product life cycle management. The Furniture segment offers office furniture under the Kimball Office and National names, and hospitality furniture under the Kimball Hospitality name. The Kimball Office and National branded products include desks, credenzas, seatings, tables, collaborative workstations, contemporary cubicle systems, filing and storage units, and accessories, such as audio visual boards and task lighting for private offices, open floor plan areas, conference rooms, training rooms, lobby, and lounge areas with wood, metal, laminate, paint, and fabric options; and Kimball Hospitality branded products comprise headboards, desks, tables, dressers, entertainment centers, chests, wall panels, upholstered seating, task seating, and vanities for hotel properties, condominiums, and mixed use developments. This segment markets office furniture through its salespersons to end users, office furniture dealers, wholesalers, rental companies, and catalog houses, as well as hospitality furniture through independent manufacturers' representatives. The company was incorporated in 1939 and is headquartered in Jasper, Indiana.

6) Five Below, Inc. (NASDAQ:FIVE)

SectorServices
IndustrySpecialty Retail, Other
Market Cap$1.63B
Beta-

FIVE stock chart

Key Metrics

Debt/Equity Ratio0.00
Long Term Debt/Equity Ratio0.00
5-Year Projected Earnings Per Share Growth Rate34.50%
Short Interest3.98%

Five Below, Inc. operates as a specialty value retailer offering merchandise for teen and pre-teen customers in the United States. The company's stores offer approximately 4,000 stock-keeping units across various product categories, including style, room, sports, media, crafts, party, candy, and seasonal. As of January 28, 2012, it operated 192 stores in Pennsylvania, New Jersey, Delaware, Maryland, Virginia, Massachusetts, New Hampshire, West Virginia, North Carolina, New York, Connecticut, Rhode Island, Ohio, Illinois, Indiana, and Michigan under the name Five Below'. The company was formerly known as Cheap Holdings, Inc. and changed its name to Five Below, Inc. in July 2002. Five Below, Inc. was founded in 2002 and is headquartered in Philadelphia, Pennsylvania.

7) Echo Global Logistics, Inc. (NASDAQ:ECHO)

SectorServices
IndustryTrucking
Market Cap$439.07M
Beta-

ECHO stock chart

Key Metrics

Debt/Equity Ratio0.00
Long Term Debt/Equity Ratio0.00
5-Year Projected Earnings Per Share Growth Rate30.44%
Short Interest13.39%

Echo Global Logistics, Inc. provides technology-enabled transportation and supply chain management services in the United States. Its Web-based technology platform compiles and analyzes data from its network of approximately 24,000 transportation providers to serve clients' shipping and freight management needs. The company offers services across various transportation modes, including truckload, less-than truck-load, small parcel, inter-modal, domestic air, expedited, and international. Its logistics services comprise rate negotiation; shipment execution and tracking; carrier management; routing compliance; freight bill audit and payment; and performance management and reporting functions, including executive dashboard tools. As of December 31, 2011, the company procured transportation and provided logistics services for approximately 29,300 clients operating in various industries, such as manufacturing, construction, consumer products, and retail. Echo Global Logistics, Inc. was founded in 2005 and is headquartered in Chicago, Illinois.

*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/24/2012.

Source: 7 Low-Debt Small-Cap Stocks Set For Growth