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  • 7 Undervalued Small Cap Stocks With Minimal Debt 0 comments
    Sep 12, 2012 11:29 AM | about stocks: GIII, GMAN, KFY, MFLX, NSP, RUE, SYKE

    Many people think of debt as falling into a huge hole. Without a windfall, it usually takes a lot of time and effort to climb out and get back on even ground. Companies that find themselves in this situation tend to repel potential investors as their situation appears to be too much of an uphill battle. With this in mind, we developed a list of small cap stocks that have managed to keep their debt ratios manageable. By not taking on debt and leveraging assets to fund the business, these companies have avoided compromising their capital structure. In addition, all of the stocks in our list today appear to be trading below their true value. Take a look at the list of small cap stocks below to begin your own evaluation.

    The PEG ratio (price/earnings to growth ratio) is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share [EPS], and the company's expected growth. In general, the P/E ratio is higher for a company with a higher growth rate. Thus using just the P/E ratio would make high-growth companies appear overvalued relative to others. It is assumed that by dividing the P/E ratio by the earnings growth rate, the resulting ratio is better for comparing companies with different growth rates. A lower ratio is 'better' (cheaper) and a higher ratio is 'worse' (expensive) - a PEG ratio of 1 means the company is fairly priced.

    The Price/Sales ratio is a price-multiple valuation metric used to help identify if a firm is cheap by its twelve month trailing sales numbers. In the most basic terms it let's an investor know how much the investment community is willing to pay for every dollars worth of sales. A firm with a P/S ratio of one or lower would be viewed as cheap because investors are paying $1 or less for every dollars worth of a firm's sales. On the other hand, a firm is generally considered to be expensive when the P/S ratio is above three. These are general guidelines used by the investment community not hard rules to be clear. Price/Sales Ratio = Current Stock Price/Revenue (sales) per Share

    The Long Term Debt/Equity Ratio is a variation of the traditional debt-to-equity ratio; this value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios.

    We first looked for small cap stocks. We then screened for businesses that are undervalued when company growth rate is taken into account (PEG Ratio < 1)(P/S<1). We next screened for businesses that have maintained a sound long term capital structure (Long Term D/E Ratio<.1). We did not screen out any sectors.

    Do you think these small-cap stocks deserve to grow higher? Use our screened list as a starting point for your own analysis.

    1) Insperity, Inc. (NYSE:NSP)

    Sector Services
    Industry Business Services
    Market Cap $626.80M
    Beta 1.11

    NSP stock chart

    Key Metrics

    Price/Earnings to Growth Ratio 0.81
    Price/Sales Ratio 0.30
    Long Term Debt/Equity Ratio 0.00
    Short Interest 3.43%

    Insperity, Inc. provides an array of human resources and business solutions to help enhance business performance for small and medium-sized businesses. The company provides its HR business offering through its Workforce Optimization solution, which encompasses a range of human resource functions, including payroll and employment administration, employee benefits, workers' compensation, government compliance, performance management, and training and development services. It also offers MidMarket solutions, performance management, expense management, time and attendance, organizational planning, employment screening, recruiting services, retirement services, business insurance, and technology services solutions through desktop applications and software as a service delivery models. As of December 31, 2011, it had 48 sales offices in 24 markets in the United States. The company was formerly known as Administaff, Inc. and changed its name to Insperity, Inc. in March 2011. Insperity, Inc. was founded in 1986 and is headquartered in Kingwood, Texas.

    2) Gordmans Stores, Inc. (NASDAQ:GMAN)

    Sector Services
    Industry Home Furnishing Stores
    Market Cap $344.67M
    Beta -

    GMAN stock chart

    Key Metrics

    Price/Earnings to Growth Ratio 0.91
    Price/Sales Ratio 0.59
    Long Term Debt/Equity Ratio 0.00
    Short Interest 1.64%

    Gordmans Stores, Inc. operates department stores under the Gordmans name in the United States. Its merchandise selection includes a range of apparel, footwear, home fashions products, and accessories, including fragrances. The company offers apparels, including young men's, men's, juniors', women's, team, plus sizes, maternity, and children's clothing comprising offerings for infants, toddlers, boys, and girls; and accessories consisting of designer fragrances, intimate apparel, handbags, sunglasses, fashion jewelry, legwear, and sleepwear. Its home fashions products consist of wall art, photo frames, accent furniture, accent lighting, candles, ceramics, vases, seasonal dcor, floral and garden, gourmet food and candy, toys, luggage, pet accessories, housewares, decorative pillows, fashion rugs, and bedding and bath products. As of January 28, 2012, the company operated 74 stores located in various shopping center developments, including regional enclosed shopping malls, lifestyle centers, and power centers in 16 Midwestern states. Gordmans Stores, Inc. was founded in 1915 and is headquartered in Omaha, Nebraska.

    3) G-III Apparel Group, Ltd. (NASDAQ:GIII)

    Sector Consumer Goods
    Industry Textile - Apparel Clothing
    Market Cap $656.61M
    Beta 2.44

    GIII stock chart

    Key Metrics

    Price/Earnings to Growth Ratio 0.77
    Price/Sales Ratio 0.52
    Long Term Debt/Equity Ratio 0.00
    Short Interest 12.40%

    G-III Apparel Group Ltd. designs, manufactures, and markets women's and men's apparel primarily in the United States. It provides outerwear, dresses, sportswear, women's suits, and women's performance wear. The company also offers accessories, such as luggage, women's handbags, small leather goods, and cold weather accessories. It also provides men's dress shirts, men's tailored clothing, men's accessories, men's cold weather accessories, men's and women's footwear, eyewear, watches, neckwear, and sweaters.

    The company markets its apparel and other products under proprietary brands, including the Andrew Marc, Marc New York, Jessica Howard, Black Rivet, G-III, Eliza J, Marvin Richards, Siena Studio, Winlit, Marc Moto, G-III Sports by Carl Banks, and G-III for Her, as well as under various licensed and private label brands. G-III Apparel Group Ltd. offers its products to department, specialty, and mass merchant retail stores, as well as upper tier stores and catalogs primarily in the United States, Canada, Europe, and the Far East. The company distributes its products through its Wilson's Leather and Andrew Marc Websites, direct sales force, and outlet stores. As of January 31, 2012, it operated 139 retail stores comprising 135 outlet stores under the Wilsons Leather name; and 4 outlet stores under the Andrew Marc brand. G-III Apparel Group Ltd. was founded in 1956 and is based in New York, New York.

    4) Sykes Enterprises, Incorporated (NASDAQ:SYKE)

    Sector Technology
    Industry Information Technology Services
    Market Cap $595.32M
    Beta 0.97

    SYKE stock chart

    Key Metrics

    Price/Earnings to Growth Ratio 0.77
    Price/Sales Ratio 0.54
    Long Term Debt/Equity Ratio 0.00
    Short Interest 3.37%

    Sykes Enterprises, Incorporated and its subsidiaries provide outsourced customer contact management solutions and services in the business process outsourcing arena primarily in the United States, Canada, Latin America, Australia, the Asia Pacific Rim, Europe, the Middle East, and Africa. The company's services include customer care services comprising handling product information requests, describing product features, activating customer accounts, resolving complaints, cross-selling/up-selling, handling billing inquiries, changing addresses, claims handling, ordering/reservations, prequalification and warranty management, providing health information, and roadside assistance. Its services also consist of technical support services, including handling inquiries regarding hardware, software, communications services, communications equipment, Internet access technology, and Internet portal usage; and acquisition services, such as inbound up-selling of its client's products and services.

    The company delivers its customer contact management services through phone, email, Internet, text messaging, and chat. In addition, it provides various enterprise support services that comprise technical staffing and outsourced corporate help desk services. Further, the company offers fulfillment services consisting of multilingual sales order processing through the Internet and phone, payment processing, inventory control, product delivery, and product returns handling. It serves corporations, medium-sized businesses, and public institutions primarily in the communications, financial services, technology/consumer, transportation and leisure, and healthcare industries. The company was founded in 1977 and is headquartered in Tampa, Florida.

    5) rue21, Inc. (NASDAQ:RUE)

    Sector Services
    Industry Apparel Stores
    Market Cap $679.44M
    Beta -

    RUE stock chart

    Key Metrics

    Price/Earnings to Growth Ratio 0.86
    Price/Sales Ratio 0.83
    Long Term Debt/Equity Ratio 0.00
    Short Interest 14.31%

    rue21, inc. operates as a specialty apparel retailer in the United States. It provides fashion apparel and accessories for girls and guys, including graphic T-shirts, denim, dresses, shirts, hoodies, belts, jewelry, handbags, footwear, intimate apparel, and other accessories. The company sells its apparel and accessories under the brand names of rue21, rue21 etc!, tarea by rue21, Carbon and CJ Black, and Carbon Elements; and fragrances under the rue by rue21, revert eco rue21, CJ Black, sparkle rue21, Pink Ice by rue21, MetroBlack rue21, tarea by rue21, twentyone black, runway21 by rue21, Carbon Elements, Intense by rue21, and rue21 etc! brand names. As of August 23, 2012, it operated 843 stores in 46 states. The company was founded in 1976 and is headquartered in Warrendale, Pennsylvania.

    6) Korn/Ferry International (NYSE:KFY)

    Sector Services
    Industry Staffing & Outsourcing Services
    Market Cap $730.32M
    Beta 1.45

    KFY stock chart

    Key Metrics

    Price/Earnings to Growth Ratio 0.87
    Price/Sales Ratio 0.88
    Long Term Debt/Equity Ratio 0.00
    Short Interest 3.18%

    Korn/Ferry International, together with its subsidiaries, provides talent management solutions that help its clients to attract, engage, develop, and retain their talent. Its solutions include executive recruitment services focusing on recruiting board-level, chief executive, and other senior executive positions for clients in consumer, financial services, industrial, life sciences/healthcare, technology, and educational industries; and leadership and talent consulting services to assist clients with their ongoing assessment, and organizational and leadership development efforts. The company also offers recruitment process outsourcing (RPO), project recruitment, search, and consulting services for acquiring mid and high-level management professionals. It serves public and private companies, middle market and emerging growth companies, government agencies, and nonprofit organizations in North America, Europe, the Middle East, Africa, the Asia Pacific, and South America. Korn/Ferry International was founded in 1969 and is headquartered in Los Angeles, California.

    7) Multi-Fineline Electronix Inc. (NASDAQ:MFLX)

    Sector Technology
    Industry Printed Circuit Boards
    Market Cap $568.58M
    Beta 0.59

    MFLX stock chart

    Key Metrics

    Price/Earnings to Growth Ratio 0.91
    Price/Sales Ratio 0.70
    Long Term Debt/Equity Ratio 0.00
    Short Interest 4.26%

    Multi-Fineline Electronix, Inc. engages in the engineering, design, and manufacture of flexible printed circuit boards and related component assemblies for the electronics industry. The company offers integrated flexible printed circuits and component assembly solutions, such as design and application engineering, prototyping, high-volume fabrication, component assembly, and testing. It serves original equipment manufacturer and electronic manufacturing service providers in various sectors of the electronics industry, such as mobile phones and smart phones, tablets, consumer products, portable bar code scanners, computer/data storage, and medical devices. The company operates in the United States, China, Singapore, Malaysia, and the United Kingdom. Multi-Fineline Electronix, Inc. was founded in 1984 and is headquartered in Anaheim, California.

    *Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/05/2012.

    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.

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