Experienced investors speak to the importance of a diversified portfolio. What diversity means on an individual basis varies greatly. For some, it may mean investing in a number of sectors and industries. Others may define it as having a mix of stocks that are considered low to high risk. What seems to be the common theme is the importance of developing a balance of investments that speaks to your interests, standards, and short and long term goals. From this perspective, we wanted to find lesser known small cap stocks that possess good indicators for growth. For our scan, we focused on companies that have demonstrated strong trends in bottom line profitability. They are generating strong profits that stem from operational efficiency and fiscal oversight. Further, these companies have significant projected EPS growth rates for the coming year. Use the data and summaries below to see if any of these small cap stocks appeal to your investment preferences.
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 Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability. Net Margin = Net Income/Total Revenue
Return on Assets (ROA) illustrates how much a company is generating in earnings from its assets alone. This metric gives investors a picture of how profitable the company is relative to the assets in current possession. As well, it lets investors see how efficient and effective management is at generating earnings from the company's assets. While most management teams can probably make money by throwing money at an issue, very few can make very large profits with little investment.
We first looked for small cap stocks. We then looked for companies that have high future earnings per share growth forecasts(1-Year Projected EPS Growth Rate>25%). We next screened for businesses that have strong bottom line profitability (Net Margin [TTM]>10%)(ROA > 10%). We did not screen out any sectors.
Do you think these small cap stocks have the potential for future gains? Use our list to help with your own analysis.
1) Gruma S.A.B. de CV (GMK)
|Industry||Processed & Packaged Goods|
|1-Year Projected Earnings Per Share Growth Rate||38.24%|
|Return on Assets||13.94%|
Gruma, S.A.B. de C.V., through its subsidiaries, engages in the production and sale of corn flour, wheat flour, tortillas, and other related products. Its products include rice, oats, packaged tortillas, grits, snacks, hearts of palm, tortilla chips, corn chips, and potato chips, as well as flatbreads comprising pita, naan, chapatti, pizza bases, and piadina. The company also designs, manufactures, and sells machines for the production of tortillas and tortilla chips under the TORTEC and BATITEC names. Its brands include JUANA, TIA BERTA, DECASA, ROBIN HOOD, POLAR, MONICA, ROBIN HOOD, LASSIE, REPOSADA, PODEROSA, SELECTA, DEMASA, FLOR DE TRIGO, MISIN, MASECA, MISSION, GUERRERO, TORTIMASA, MASARICA, MINSA, TORTI RICA, TOSTY, RUMBA, and LA TICA.
The company offers its products to independent distributors, supermarkets, wholesalers, bakeries, cookie and pasta manufacturers, small grocery stores, tortilla and tortilla chip manufacturers, snack manufacturers, mass merchandisers, independent stores, food processors, restaurants, food service distributors, schools, hospitals, and military, as well as to governmental social welfare and distribution programs. It operates in the United States, Mexico, Venezuela, Central America, Europe, Asia, and Oceania. The company was founded in 1949 and is headquartered in San Pedro Garza Garcia, Mexico.
2) MIPS Technologies Inc. (MIPS)
|Industry||Semiconductor - Memory Chips|
|1-Year Projected Earnings Per Share Growth Rate||70.00%|
|Return on Assets||10.31%|
MIPS Technologies, Inc. provides industry-standard processor architectures and cores for digital home, networking, and mobile applications primarily in the United States, Japan, the Pacific Rim, and Europe. The company licenses embedded processor intellectual property in the form of architectures and implementations. It develops and licenses industry-standard MIPS32 and MIPS64 instruction-set architectures, application specific extensions, core designs in synthesizable and process-optimized forms, and other related intellectual property to semiconductor companies and system original equipment manufacturers. The company also offers various embedded processors that scale across various markets in standard, custom, semi-custom, and application-specific products; and MIPS-Based Systems on Chips for embedded systems. Its technology is used in digital televisions, set-top boxes, Blu-ray players, broadband customer premises equipment, WiFi access points and routers, networking infrastructure and portable/mobile communications, and entertainment products. MIPS Technologies, Inc. owns approximately 580 patent properties worldwide on various aspects of its technology. The company was founded in 1984 and is headquartered in Sunnyvale, California.
3) Rex Energy Corporation (REXX)
|Industry||Oil & Gas Drilling & Exploration|
|1-Year Projected Earnings Per Share Growth Rate||120.00%|
|Return on Assets||13.01%|
Rex Energy Corporation operates as an independent oil and gas company in the Appalachian Basin and the Illinois Basin. It focuses on the Marcellus Shale drilling projects, and Utica Shale and Upper Devonian Shale exploration activities in the Appalachian Basin. The company also holds interests in the Lawrence Field ASP Flood project, which is an oil recovery project located in Lawrence County, Illinois. As of December 31, 2011, it operated approximately 2,117 wells, including approximately 517 disposal and injection wells. The company had estimated proved reserves of 366.2 billions of cubic feet equivalent. Rex Energy Corporation was founded in 2007 and is headquartered in State College, Pennsylvania.
4) Sohu.com Inc. (SOHU)
|Industry||Internet Information Providers|
|1-Year Projected Earnings Per Share Growth Rate||57.29%|
|Return on Assets||11.75%|
Sohu.com Inc. provides Chinese online media, search, gaming, community, and mobile services in the People's Republic of China. The company's brand advertising business offers advertisements on its portal websites to companies to enhance their brand awareness online; and search and others business provides customers pay-for-click services, placements in a search directory, and online marketing services. Its online game business engages in the development, operation, and licensing of online games, including multi-player online games and web-based games; and wireless business offers mobile related services, such as news, weather forecasts, chatting, entertainment information, mobile games, mobile phone ringtones, and logo downloads to mobile phone users.
In addition, the company provides content for various channels, which cover news, entertainment, business and finance, automobile, information technology, and sports; online video content that covers television dramas, movies, television programs, documentaries, news, animations, entertainment related contents, live television webcasts, in-house produced shows and programs, and user-generated content; Focus.cn, a real estate website that provides new home and existing home information for house seekers, homeowners, and potential property or household appliance buyers; and 17173.com, a news channel Website, as well as communication and community tools, such as micro-blogs, message boards, blogs, and e-mail services. Further, it provides sohu.com, a mass portal and online media destination; Sogou.com, a proprietary search engine; Sogou Browser; Sogou Web Directory, a web directory navigation site; and Sogou Pinyin, a Chinese character input method software. The company was formerly known as Internet Technologies China Incorporated and changed its name to Sohu.com Inc. in September 1999. Sohu.com Inc. was founded in 1996 and is headquartered in Beijing, the People's Republic of China.
5) Fifth & Pacific Companies, Inc. (FNP)
|Industry||Textile - Apparel Clothing|
|1-Year Projected Earnings Per Share Growth Rate||2000.00%|
|Return on Assets||14.00%|
Fifth & Pacific Companies, Inc. engages in the design and marketing of a range of apparel and accessories. The company provides luxurious, casual, and fun women's and girl's apparel, jewelry, watches, sleepwear, sunglasses, swimwear, and baby products; and men's and women's denim, woven and knit tops, dresses and sweaters, and graphic tees. It also offers handbags, briefcases, travel bags, and small leather goods; and fashion accessories, footwear, optics, cosmetics and fragrances, tabletop products, legwear and socks, electronics cases, bedding and bath products, and stationery and paper goods.
The company sells its products to department store chains and specialty retail store customers under the AXCESS, BIRD BY JUICY COUTURE, COUTURE COUTURE, DIRTY ENGLISH, JACK SPADE, JUICY COUTURE, KATE SPADE, LUCKY BRAND, LUCKY YOU LUCKY BRAND, MARVELLA, MONET, SIGRID OLSEN, and TRIFARI brand names. As of December 31, 2011, it operated 285 specialty retail stores and 119 outlet stores in the United States; and 22 specialty retail stores and 3 outlet stores primarily in Europe and Canada. The company also engages in e-commerce and licensing operations relating to its various retail brands. The company was formerly known as Liz Claiborne, Inc. and changed its name to Fifth & Pacific Companies, Inc. in May 2012. Fifth & Pacific Companies, Inc. was founded in 1976 and is based in New York, New York.
6) Veeco Instruments Inc. (VECO)
|Industry||Semiconductor Equipment & Materials|
|1-Year Projected Earnings Per Share Growth Rate||35.29%|
|Return on Assets||10.02%|
Veeco Instruments Inc., together with its subsidiaries, designs, manufactures, and markets various equipments to make light emitting diodes and hard-disk drives worldwide. The company's LED and Solar segment designs and manufactures metal organic chemical vapor deposition and molecular beam epitaxy systems and components for the manufacturers of LEDs, wireless devices, power semiconductors, and concentrator photovoltaics, as well as to research and development applications. Its Data Storage segment designs and manufactures various technologies, including ion beam etch, ion beam deposition, diamond-like carbon, physical vapor deposition, chemical vapor deposition, and slicing, dicing, and lapping systems to create thin film magnetic heads that read and write data on hard disk drives. The company was founded in 1945 and is headquartered in Plainview, New York.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/17/2012.