Savvy investors who take interest in the growth opportunities that abound with stocks in the small cap phase, look for companies that are well positioned a bigger future. While there are many traits that signal that a company is set for growth, we focused on two characteristics for our list today: generous cash reserves and EPS growth rates above 25% for the coming year. When a company has cash on hand it can serve as the necessary source of funding to fuel the projected growth. Take a look at the graphs and summaries below to see if you find the small cap stocks in our list worthy of further investigation.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. The 1-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 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 have high future earnings per share growth forecasts(1-year projected EPS Growth Rate>25%). We then looked for businesses with a large amount of cash on hand (Current Ratio>2)(Quick Ratio>2). We did not screen out any sectors.
Do you think these small-cap stocks have more value to price in? Use our list along with your own analysis.
1) Silicon Image, Inc. (NASDAQ:SIMG)
|Industry||Semiconductor - Broad Line|
|1-Year Projected Earnings Per Share Growth Rate||250.00%|
Silicon Image, Inc. provides wireless and wired connectivity solutions that enable the distribution and presentation of high-definition content for mobile, consumer electronics, and personal computer 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.
The company also provides HDMI port processors for DTVs, AV receivers (AVRs), sound bars, and home-theater-in-a-box; HDMI transmitters for Blu-Ray players, STBs, and AVRs; and HDMI receivers for HD displays, such as projectors and PC monitors, as well as AVRs. In addition, it offers MHL/HDMI-to-HDMI bridges for HD displays, such as PC monitors and DTVs; digital visual interface receivers for HD PC displays, such as monitors and projectors; and serial advanced technology attachment controllers used in PC, DVR, and network attached storage applications. Further, it provides product interoperability and standards compliance testing services to manufacturers; and acts as an agent for promoting and administering HDMI and MHL specifications.
The company sells its products to original product manufacturers of mobile, CE, and PC products directly in North America, Europe, Taiwan, China, Japan, and Korea; and through a network of distributors in North America, Asia, and Europe. Silicon Image, Inc. was founded in 1995 and is headquartered in Sunnyvale, California.
2) Star Scientific, Inc. (STSI)
|1-Year Projected Earnings Per Share Growth Rate||1100.00%|
Star Scientific, Inc., engages in the development, implementation, and licensing of tobacco curing technology that prevents the formation of carcinogenic toxins present in tobacco and tobacco smoke, primarily the tobacco-specific nitrosamines (TSNAs). It is also involved in the development, manufacture, marketing, and sale of very low-TSNA dissolvable smokeless tobacco products, including ARIVA compressed powdered tobacco cigalett pieces, STONEWALL Hard snuff, and modified risk tobacco products. In addition, the company develops, manufactures, markets, and sells nutraceutical dietary supplements, such as Anatabloc for anti-inflammatory support, and CigRx, a tobacco alternative for the maintenance of healthy metabolism.
Further, it develops dietary supplements and pharmaceutical products that have a botanical-based component to treat tobacco dependence and a range of neurological conditions, including Alzheimer's disease, Parkinson's disease, schizophrenia, and depression. The company sells its products through distributors in the United States. Star Scientific, Inc. was founded in 2000 and is based in Glen Allen, Virginia.
3) Syneron Medical Ltd. (NASDAQ:ELOS)
|Industry||Medical Appliances & Equipment|
|1-Year Projected Earnings Per Share Growth Rate||223.81%|
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. Its products also comprise dental laser systems for the treatment of oral soft and hard tissue, as well as products in pipeline for teeth whitening and fluorination.
The company also develops, manufactures, and markets non-invasive technologies for fat cell destruction and body sculpting; and Viador system, a handheld device with an RF-needle array for use in transdermal delivery of biologic drug-products via a system-specific skin patch. It sells its products to dermatologists, plastic and cosmetic surgeons, other qualified practitioners, and aestheticians and medical spas through direct sales force and distributors; and to home-use consumers directly, as well as through retailers and a chain of distributors. Syneron Medical Ltd. was founded in 2000 and is headquartered in Yokneam Illit, Israel.
*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.