Most people appreciate an acquisition that is obtained at a price lower than expected. It frees up money for other purposes. With this in mind, we searched the small cap stock sector to find companies that are trending towards sizeable growth in the next year and also appear to be trading below their true value. When a stock is trading at a discount and is simultaneously projected to grow there are good opportunities for the investor to realize gains. See the list of small cap stocks below to learn more.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. The one-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 price/book value ratio is a great price-multiple valuation metric to find companies that could be potentially undervalued or overvalued. If a firm has a price/book value ratio of less than 1 it is stated to be trading below "break up" value. A lower P/BV ratio can indicate a potentially mispriced company or indicate that something is fundamentally wrong with it.
The forward P/E is a price multiple valuation metric, which is similar to the current P/E ratio, except that it uses the forecasted earnings instead. While this number might not be as accurate because it uses "forecasted" numbers, it does offer the benefit of illustrating analysts' expectations of a firm. If the market believes that earnings will grow moving forward, then the forward P/E should be lower than the current P/E. Financial Leverage, also known as the Equity Multiplier, illustrates how a firm is financing its assets. The lower the number the more a firm is financing its assets internally through stockholder equity. The higher this metric is the more the firm is relying on debt to finance its assets.
We first looked for small cap stocks. Next, we screened for businesses with projected high growth, measured by 1-year projected EPS growth above 25%. From here, we looked for companies that are undervalued from a price-multiple valuation standpoint (P/BV<1)(forward P/E<10). We did not screen out any sectors.
Do you think these small-cap stocks failed to price their value accurately? Use our list along with your own analysis.
1) AuRico Gold Inc. (AUQ)
|1-Year Projected Earnings Per Share Growth Rate||81.25%|
|Price/Book Value Ratio||0.80|
|Forward Price/Earnings Ratio||7.38|
AuRico Gold Inc. engages in the exploration, development, and production of gold and silver projects and properties in Canada, Mexico, and Australia. Its principal property includes the Ocampo mine covering approximately 15,000 hectares located in Chihuahua State. The company was formerly known as Gammon Gold Inc. and changed its name to AuRico Gold Inc. in June 2011. AuRico Gold Inc. was founded in 1986 and is based in Toronto, Canada.
2) Tower Group Inc. (TWGP)
|Industry||Property & Casualty Insurance|
|1-Year Projected Earnings Per Share Growth Rate||90.34%|
|Price/Book Value Ratio||0.70|
|Forward Price/Earnings Ratio||6.71|
Tower Group, Inc., through its subsidiaries, provides commercial, specialty, and personal property and casualty insurance products and services to businesses in various industries and to individuals in the United States. The company offers commercial multiple-peril packages that comprise property, liability, business interruption, equipment breakdown, fidelity, and inland marine coverages; workers' compensation policies; commercial and personal automobile policies; personal packages; and mono-line commercial general liability and commercial umbrella policies for individuals and business owners. The company markets its products and services through its independent retail, wholesale, and program underwriting agents. Tower Group, Inc. was founded in 1989 and is headquartered in New York, New York.
3) MCG Capital Corporation (MCGC)
|1-Year Projected Earnings Per Share Growth Rate||64.29%|
|Price/Book Value Ratio||0.87|
|Forward Price/Earnings Ratio||9.91|
MCG Capital Corporation is a private equity firm specializing in investments in middle market companies. The firm does not prefer investments in highly cyclical and volatile industry sectors and businesses with significant volatility exposure. It seeks to invest in small to mid sized companies. The firm prefers to invest in acquisitions, growth financings, organic growth, recapitalization, and leveraged buyouts. It invests in companies based in the United States. It was formerly known as MCG Credit Corporation. MCG Capital Corporation was founded in 1990 and is based in Arlington, Virginia.
4) Meadowbrook Insurance Group Inc. (MIG)
|Industry||Property & Casualty Insurance|
|1-Year Projected Earnings Per Share Growth Rate||108.00%|
|Price/Book Value Ratio||0.65|
|Forward Price/Earnings Ratio||7.27|
Meadowbrook Insurance Group, Inc., through its subsidiaries, operates as a specialty commercial insurance underwriter and insurance administration services company in the United States. The company markets and underwrites specialty property and casualty insurance programs and products, including workers' compensation, general liability, commercial property, environmental, garage, commercial multi-peril, commercial auto, surety, and marine insurance on an admitted and non-admitted basis through a network of independent retail agents, wholesalers, program administrators, and general agents. The company was founded in 1955 and is headquartered in Southfield, Michigan.
5) Golden Star Resources, Ltd. (GSS)
|1-Year Projected Earnings Per Share Growth Rate||83.33%|
|Price/Book Value Ratio||0.75|
|Forward Price/Earnings Ratio||5.86|
Golden Star Resources Ltd., through its subsidiaries, engages in the acquisition, exploration, development, and operation of gold properties. It owns and operates the Bogoso/Prestea gold mining and processing operations that cover approximately 40 kilometers of strike along the southwest-trending Ashanti gold district in western Ghana; and the Wassa open-pit gold mine and carbon-in-leach processing plant located to the east of Bogoso/Prestea in southwest Ghana. The company also holds interests in gold exploration projects in Sierra Leone, Niger and Cte d'Ivoire, and South America; and holds and manages exploration properties in Brazil. Golden Star Resources Ltd. was founded in 1984 and is headquartered in Littleton, Colorado.
6) Aegean Marine Petroleum Network Inc. (ANW)
|Industry||Basic Materials Wholesale|
|1-Year Projected Earnings Per Share Growth Rate||55.56%|
|Price/Book Value Ratio||0.62|
|Forward Price/Earnings Ratio||5.98|
Aegean Marine Petroleum Network, Inc., together with its subsidiaries, operates as a marine fuel logistics company that supplies and markets refined marine fuel and lubricants to ships at ports, sea, and rivers. It offers marine fuel to various customers in the shipping industry, including tankers, container ships, drybulk carriers, cruise ships, reefers, LNG/LPG, car carriers, ferries, and marine fuel traders and brokers. The company also markets and distributes marine lubricants under the Alfa Marine Lubricants brand name.
In addition, it provides a range of shipping services, such as technical support and maintenance, insurance arrangement and handling, financial administration, and accounting services. The company serves customers in Greece, Gibraltar, the United Arab Emirates, Jamaica, Singapore, northern Europe, Antwerp-Rotterdam-Amsterdam, Portland, the United Kingdom, West Africa, Vancouver, Montreal, Mexico, Trinidad and Tobago, Las Palmas, Tenerife, Morocco, Cape Verde, and Panama. As of April 11, 2012, it owned a fleet of 61 bunkering vessels, 55 of which are double-hull, and chartered 9 bunkering vessels, 4 of which are double hull. The company was founded in 2005 and is based in Athens, Greece.
7) GFI Group Inc. (GFIG)
|Industry||Investment Brokerage - National|
|1-Year Projected Earnings Per Share Growth Rate||120.00%|
|Price/Book Value Ratio||0.74|
|Forward Price/Earnings Ratio||8.45|
GFI Group Inc. provides wholesale brokerage, clearing, electronic execution, and trading support products for financial markets. The company offers brokerage and trade execution services, clearing services, market data and trading platform, and other software products to institutional customers. The company primarily serves investment and commercial banks, large corporations, asset managers, insurance companies, hedge funds, and proprietary trading firms in the Americas; Europe, the Middle East, and Africa; and Asia. GFI Group Inc. was founded in 1987 and is headquartered in New York, New York.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on August 30, 2012.