When a stock price takes a dip, one thing is for certain, potential investors do not want to see that company loaded down with debt. Too much debt can send a red flag about the long-term financial well being of a company. With that in mind, we ran a scan to find small-cap stocks that appear to be offered below their true value and also have relatively little debt. Small-cap sized companies that have not borrowed heavily against assets demonstrate that they have other sources of funding to fuel growth. We think you will enjoy reviewing the list of small-cap stocks below to make your own assessment.
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 with its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it with 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.
The Price/Earnings ratio is one of the most commonly used price-multiple metrics. Often, EPS from the last four quarters is used to derive this number. A firm that has a high P/E ratio generally indicates that investors have high expectations of the firm relative to future earnings growth. By the opposite token, investors generally have lower expectations of a firm with a low P/E ratio. A firm that holds a P/E below 10 could be viewed as having "value investment" potential. One thing to remember is that EPS is an accounting measure that could be potentially manipulated. Thus the P/E is only as good as the quality of the earnings.
The Price/Cash Flow ratio is a price-multiple valuation metric that also measures a firm's future financial health. An advantage of using cash flow is that it removes non-cash factors, which helps provide a clearer picture of how much money the firm is taking in from a valuation standpoint. Price/Cash Flow Ratio = Current Stock Price/Cash Flow Per Share
We first looked for small-cap stocks. We then looked for businesses that have maintained a sound long-term capital structure (Long Term D/E Ratio<.1). Next, we then screened for businesses that are trading at a discount (P/E<10) (P/CFO<10). We did not screen out any sectors.
Do you think these small-cap stocks have strong enough fundamentals to move higher? Please use our list to assist with your own analysis.
1) Kulicke & Soffa Industries Inc. (NASDAQ:KLIC)
|Industry||Semiconductor Equipment & Materials|
|Long Term Debt/Equity Ratio||0.00|
|Price/Cash Flow Ratio||2.21|
Kulicke and Soffa Industries, Inc. designs, manufactures, and sells capital equipment and expendable tools to assemble semiconductor devices, including integrated circuits, powered discrete devices, light-emitting diodes, and power modules. It also services, maintains, repairs and upgrades its equipment. The company operates in two segments, Equipment and Expendable Tools. The Equipment segment manufactures and sells a line of ball bonders to connect very fine wires made of gold or copper between the bond pads of the semiconductor devices or dies, and the leads on its package; heavy wire wedge bonders for the power semiconductor and automotive power module markets; stud bumpers; and die bonders that are used to attach a die to the substrate or lead frame, which will house the semiconductor device.
The Expendable Tools segment provides various expendable tools for a range of semiconductor packaging applications. Its products include capillaries, which are used in ball bonders; bonding wedges for wedge bonders; and saw blades to cut silicon wafers into individual semiconductor die, as well as to cut semiconductor devices that have been molded in a matrix configuration into individual units. The company serves semiconductor device manufacturers, outsourced semiconductor assembly and test providers, other electronics manufacturers, and automotive electronics suppliers primarily in the United States and the Asia/Pacific region. Kulicke and Soffa Industries, Inc. was founded in 1951 and its headquarters is in Singapore.
2) Great Southern Bancorp Inc. (NASDAQ:GSBC)
|Industry||Regional - Southwest Banks|
|Long Term Debt/Equity Ratio||0.09|
|Price/Cash Flow Ratio||4.45|
Great Southern Bancorp, Inc. operates as the bank holding company for Great Southern Bank that offers various banking products and services in Missouri, Iowa, Kansas, Nebraska, Arkansas, and Minnesota. Its deposit products include regular savings accounts, checking accounts, money market accounts, fixed-interest rate certificates with varying maturities, certificates of deposit, brokered certificates, and individual retirement accounts.
The company's loan portfolio comprises residential and commercial real estate loans, construction loans, and commercial business loans, as well as secured consumer loans, including automobile loans, boat loans, home equity loans, loans secured by savings deposits, home improvement loans, guaranteed student loans, and unsecured consumer loans. It also offers general property, casualty, and life insurance agency services; personal, commercial, and group travel services; and investment and related services. As of April 27, 2012, it operated 107 retail banking centers. The company was founded in 1923 and its headquarters is in Springfield, Missouri.
3) Capella Education Co. (NASDAQ:CPLA)
|Industry||Education & Training Services|
|Long Term Debt/Equity Ratio||0.00|
|Price/Cash Flow Ratio||3.29|
Capella Education Company operates as an online post-secondary education services company in the United States and internationally. The company, through its Capella University, offers various doctoral, master's, and bachelor's programs primarily for working adults in public service leadership, behavioral health and human services, business management and technology, and education markets; and online distance learning services for degree-entry programs and doctoral level programs in various disciplines, including business, management, psychology, law and computing disciplines.
It also provides learner support services, such as academic services comprising new learner orientation, technical support, academic advising, research services, online tutoring, and writing services; and administrative services through the telephone and Internet. In addition, the company's learner support services include library services, such as access to collection of online journals, eBooks, and interlibrary loan services; and career center services comprising career counseling, job search advising, and career management support services to learners and alumni. As of December 31, 2011, the company offered approximately 1,450 online courses and 43 academic programs with 140 specializations to approximately 37,000 learners. Capella Education Company was founded in 1991 and its headquarters is in Minneapolis, Minnesota.
4) Celestica Inc. (NYSE:CLS)
|Industry||Printed Circuit Boards|
|Long Term Debt/Equity Ratio||0.00|
|Price/Cash Flow Ratio||2.33|
Celestica Inc. provides electronics manufacturing services to original equipment manufacturers and service providers in the communications, consumer, computing, and industrial, aerospace and defense, healthcare, green technology, and semiconductor capital equipment end markets in the Americas, Asia, and Europe. It offers supply chain management, design, prototyping, systems assembly and test, product assurance, failure analysis, quality management, mechanical and systems integration, order fulfillment and logistics, and after-market services, as well as green services comprising removal of hazardous substances and waste management/recycling. The company provides its products and services for smartphones; servers; networking, wireless, and telecommunications equipment; storage devices; in-flight entertainment and guidance systems; healthcare products; audiovisual equipment; printer supplies; peripherals; semiconductor capital equipment; and solar panels and inverters. Celestica Inc. was founded in 1996 and its headquarters is in Toronto, Canada.
Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/04/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: This article was prepared for ZetaKap Media by one of our full-time analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.