4 Cash-Strong Tech Small Caps With Potent Growth Projections

by: ZetaKap

We all know that investing is not for the faint of heart. To be successful, it often requires courage as well as an elevated risk tolerance. This is especially true for investors who prefer growth opportunities. In the current market, there are few categories that consistently offer growth opportunities that compare with technology stocks at the small cap level. With these companies, increased exposure is a given and many people prefer to be impartial bystanders rather than investors. However, for those who prefer higher stakes, we have developed a list of small cap tech stocks that have projected EPS growth rates above 79% for the coming year. Additionally, all of the companies listed have a great level of liquidity which is a necessary attribute for any company that intends to grow significantly. We think you will enjoy reviewing the list below and making your own assessment.

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 technology stocks. From here, we then looked for companies that have high future earnings per share growth forecasts(1-year projected EPS Growth Rate>25%). From here, we then looked for companies that have a substantial amount of cash on hand (Current Ratio>2)(Quick Ratio>2).

Do you think these small-cap stocks are in strong positions for future growth? Use our list along with your own analysis.

1) Sonus Networks, Inc. (NASDAQ:SONS)

Sector Technology
Industry Communication Equipment
Market Cap $503.98M
Beta 1.74

SONS stock chart

Key Metrics

1-Year Projected Earnings Per Share Growth Rate 100.00%
Current Ratio 6.02
Quick Ratio 5.76
Short Interest 5.78%

Sonus Networks, Inc. provides infrastructure and subscriber solutions. It offers session border control, voice over Internet protocol, and access and VoIP media gateway solutions that allow the delivery of voice and multimedia sessions over IP networks. Its products include Sonus SBC 5200 and Sonus SBC 5100 Session Border Controllers, which provide IP to IP SBC functionality for service providers and enterprise customers; Sonus SBC 9000 Session Border Controller that permits service providers to transform their time division multiplexing networks to IP; PSX Policy & Routing Server, which translates business policies into actual call control, routing, and service selection decisions; GSX9000 Open Services Switch that enables voice traffic to be transported over packet networks; GSX4000 Open Services Switch; and ASX Call Feature Server that provides local area calling and regulatory features for residential and enterprise markets. Sonus Networks, Inc. was founded in 1997 and is headquartered in Westford, Massachusetts.

2) Encore Wire Corp. (NASDAQ:WIRE)

Sector Technology
Industry Diversified Electronics
Market Cap $696.57M
Beta 0.88

WIRE stock chart

Key Metrics

1-Year Projected Earnings Per Share Growth Rate 79.25%
Current Ratio 6.19
Quick Ratio 5.15
Short Interest 4.17%

Encore Wire Corporation manufactures and supplies electrical building wires and cables for use in interior electrical wiring applications in commercial and industrial buildings, homes, apartments, and manufactured housings. Encore Wire Corporation was founded in 1989 and is based in McKinney, Texas.


Sector Technology
Industry Semiconductor Equipment & Materials
Market Cap $485.42M
Beta 2.66

IMOS stock chart

Key Metrics

1-Year Projected Earnings Per Share Growth Rate 122.86%
Current Ratio 2.52
Quick Ratio 2.21
Short Interest 2.66%

ChipMOS TECHNOLOGIES (Bermuda) LTD., through its subsidiaries, provides semiconductor testing and assembly services for LCD and other flat-panel display driver semiconductors, and memory and logic/mixed-signal products. The company offers a range of back-end testing services for memory and logic/mixed-signal semiconductors that include engineering testing consisting of software program development, electrical design validation, reliability analysis, and failure analysis; wafer probing that involves visual inspection and electrical testing of the processed wafer for defects; laser repairing of memory products; burn-in testing to screen out unreliable products; top marking; final testing; and final inspection and packing. The company was founded in 1986 and is based in Hsinchu, Taiwan.

4) Orbotech Ltd. (NASDAQ:ORBK)

Sector Technology
Industry Diversified Electronics
Market Cap $364.97M
Beta 1.43

ORBK stock chart

Key Metrics

1-Year Projected Earnings Per Share Growth Rate 100.00%
Current Ratio 4.59
Quick Ratio 3.75
Short Interest 0.76%

Orbotech Ltd. engages in designing, developing, manufacturing, marketing, and servicing yield-enhancing and production solutions for specialized applications in the supply chain of the electronics industry. The company was formerly known as Optrotech Ltd. and changed its name to Orbotech Ltd. as a result of its merger with Orbot Systems Ltd. in October 1992. Orbotech Ltd. was founded in 1981 and is headquartered in Yavne, Israel.

*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 10/10/2012.

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.