It is not unusual to hear grumbling about the inundation of information that we receive on a daily basis. We all know it can be a daunting task to try to keep up. But most of us find ourselves wanting to be in the know because it keeps life interesting and presents us with cutting-edge ideas for investments and pursuits. That is why some investors find tech companies at the small-cap level particularly intriguing. Many of these companies have not yet landed on the mainstream radar because of their size. In this category we repeatedly find growth opportunities, albeit with an increase in risk for investors. For our list today we developed a list of small-cap tech stocks with projected EPS growth of 25% or better in the next five years, yet they all have a solid level of liquidity, which points to disciplined financial oversight. We think you will find this list of small-cap tech stocks worthy of further investigation.
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.
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. We then looked for businesses with estimated high-growth, with 5-year projected EPS growth above 25%. We then looked for businesses that have strong liquidity (Current Ratio>2) (Quick Ratio>2).
Do you think these small-cap stocks deserve to trade higher? Use our screened list as a starting point for your own analysis.
1) Comtech Telecommunications Corp. (CMTL)
|5-Year Projected Earnings Per Share Growth Rate||35.00%|
Comtech Telecommunications Corp. designs, develops, produces and markets products, systems and services for communications solutions in the United States and internationally. The company's Telecommunications Transmission segment offers satellite earth station equipment and systems, including satellite earth station modems, block up converters, power amplifiers, frequency converters, transceivers, access devices, voice gateways, Internet protocol encapsulators, and media routers; over-the-horizon microwave equipment and systems; and modular tactical transmission systems, as well as markets data compression integrated circuits. The company was founded in 1967 and its headquarters is in Melville, New York.
2) Allot Communications Ltd. (ALLT)
|5-Year Projected Earnings Per Share Growth Rate||26.20%|
Allot Communications Ltd. engages in developing, selling, and marketing Internet protocol service optimization and revenue generation solutions in Europe, the Middle East, Africa, the Americas, Asia, and Oceania. Its solutions are used to create policies to monitor network applications, enforce quality of service policies that guarantee mission-critical application performance, mitigate security risks, and leverage network infrastructure investments. Allot Communications Ltd. was founded in 1996 and is based in Hod-Hasharon, Israel.
3) Procera Networks, Inc. (PKT)
|Industry||Business Software & Services|
|5-Year Projected Earnings Per Share Growth Rate||26.25%|
Procera Networks, Inc. provides intelligent policy enforcement solutions based on deep packet inspection technology that enable mobile and broadband network operators and entities to manage private networks. Procera Networks, Inc. was founded in 2002 and its headquarters is in Fremont, California.
4) Vocera Communications, Inc. (VCRA)
|5-Year Projected Earnings Per Share Growth Rate||44.75%|
Vocera Communications, Inc. provides mobile communication solutions to healthcare and non-healthcare markets. The company offers Voice Communication solution, which includes a wearable voice-controlled communication badge and a software platform that enables users to connect instantly with other hospital staff simply by saying the name, function, or group name of the desired recipient; Messaging solution, which delivers text messages, alerts, and other information directly to and from smartphones; and Care Transition solution, a hosted voice and text-based software application that captures, manages, and monitors patient information when responsibility for the patient is transferred from one caregiver to another. Vocera Communications, Inc. was founded in 2000 and its headquarters is in San Jose, California.
5) Greenway Medical Technologies, Inc. (GWAY)
|Industry||Information Technology Services|
|5-Year Projected Earnings Per Share Growth Rate||27.50%|
Greenway Medical Technologies, Inc. provides integrated information technology solutions and managed business services to ambulatory healthcare providers in the United States. It offers PrimeSUITE, a single integrated application with electronic health record, practice management, and interoperability functionality. The company was founded in 1998 and its headquarters is in Carrollton, Georgia.
6) Silicon Image, Inc. (SIMG)
|Industry||Semiconductor - Broad Line|
|5-Year Projected Earnings Per Share Growth Rate||35.00%|
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. Silicon Image, Inc. was founded in 1995 and its headquarters is in Sunnyvale, California.
Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 11/01/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.