The basic materials sector tends to be viewed as a fairly stable category for investments. This is a trait that can be helpful in reducing risk when looking at companies at the smaller end of the spectrum. Of course, all small-cap companies, regardless of sector, need to have additional traits that will point to strong management and potential for expansion. For our list today, we focused on two characteristics: sizable cash reserves and EPS growth rates above 25% in the next five years. Liquidity provides a company with the funding to both fuel and achieve the projected growth. Take a look at the information below to see if any of these small-cap basic materials stocks spark your curiosity.
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).
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 basic materials stocks. From here, we then looked for companies with a large amount of cash on hand (Current Ratio>2) (Quick Ratio>2). We then screened for businesses that have high future earnings per share growth forecasts (5-year projected EPS Growth Rate>25%).
Do you think these small-cap stocks hold solid value? Please use our list to assist with your own analysis.
1) CARBO Ceramics Inc. (CRR)
|Industry||Oil & Gas Equipment & Services|
|5-Year Projected Earnings Per Share Growth Rate||35.20%|
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. In addition, the company provides a range of technologies for spill prevention, containment, countermeasures and geotechnical monitoring, as well as offers monitoring systems and services for bridges, buildings, tunnels, dams, slopes, embankments, volcanoes, landslides, mines, and construction projects primarily for customers in auto racing teams, surveyors, experimental physicists, radio astronomers, and naval architects markets. It principally sells its products and services to operators of oil and natural gas wells, and oilfield service companies. The company was founded in 1987 and its headquarters is in Houston, Texas.
2) Intrepid Potash, Inc. (IPI)
|5-Year Projected Earnings Per Share Growth Rate||29.05%|
Intrepid Potash, Inc. produces and markets muriate of potash and langbeinite under the Trio brand name primarily in the United States. Its langbeinite, sulfate of potash magnesia, is a low-chloride potassium fertilizer with the additional benefits of sulfate and magnesium, providing a multi‑nutrient product. The company also offers by-products, such as salt, magnesium chloride, and metal recovery salts. It serves agricultural, industrial, and animal feed markets. The company was founded in 2000 and is based in Denver, Colorado.
3) Thompson Creek Metals Company Inc. (TC)
|Industry||Industrial Metals & Minerals|
|5-Year Projected Earnings Per Share Growth Rate||54.50%|
Thompson Creek Metals Company Inc. engages in mining, milling, processing, and marketing of molybdenum products in the United States and Canada. Its principal properties include the Thompson Creek Mine, an open-pit molybdenum mine and concentrator located in Idaho; the Endako Mine, an open-pit molybdenum mine, concentrator, and roaster in British Columbia; and the Langeloth metallurgical facility in Pennsylvania. The company also holds interests in exploration properties comprising the Berg property, a copper, molybdenum, and silver exploration project located in British Columbia; the Davidson property, an underground molybdenum exploration project in British Columbia; the Howard's Pass property, a lead and zinc project situated in the Yukon territory-northwest territories border; and the Maze Lake property, a gold project located in the Kivalliq district of Nunavut.
In addition, it has an interest in the Mt. Milligan project, a development project located in British Columbia. The company produces molybdenum products, primarily molybdic oxide and ferromolybdenum, as well as soluble technical oxide, pure molybdenum tri-oxide, and high purity molybdenum disulfide. As of December 31, 2011, its consolidated proven and probable reserves totaled 448.8 million pounds of contained molybdenum in the Thompson Creek Mine and the Endako Mine. The company was formerly known as Blue Pearl Mining Ltd. and changed its name to Thompson Creek Metals Company Inc. in May 2007. Thompson Creek Metals Company Inc. is based in Denver, Colorado.
4) KiOR, Inc. (KIOR)
|Industry||Oil & Gas Refining & Marketing|
|5-Year Projected Earnings Per Share Growth Rate||34.00%|
KiOR, Inc., a development stage renewable fuels company, focuses on producing cellulosic gasoline and diesel from non-food biomass using its proprietary biomass-to-cellulosic fuel technology platform. The company intends to sell its products to refiners, terminal and rack owners, and fleet users for use in their vehicles. KiOR, Inc. was founded in 2007 and its headquartered is in Pasadena, Texas.
Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/13/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.