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5 Rock-Solid Small Caps To Beat The Market

|Includes:EZCORP, Inc. (EZPW), GMAN, RGR

The 5 stocks in this article had been chosen from a screen from I screened for small-caps (cap 300M to 2B) with strong EPS growth numbers, little or no debt, good ROE and ROA numbers and finally, good valuations(P/E of no higher than 20).

Shooting For #1, Sturm, Ruger & Co. (NYSE:RGR)

I recommended this stock in a previous article. Here is a bit of what it does:

Sturm, Ruger & Company, Inc. engages in the design, manufacture, and sale of firearms in the United States. It offers single-shot, autoloading, bolt-action, and sporting rifles; shotguns; rim fire autoloading and center fire autoloading pistols; and single-action and double-action revolvers. The company also manufactures and sells accessories and replacement parts for its firearms. In addition, it provides investment castings made from steel alloys directly or through manufacturers' representatives. The company sells its firearm products through independent wholesale distributors to the commercial sporting market under the Ruger name; and exports its firearms through a network of commercial distributors and directly to law enforcement agencies and foreign governments. Sturm, Ruger & Company, Inc. was founded in 1948 and is based in Southport, Connecticut.

Here are some numbers:

12mth trailing P/E: 16.91 (Cheap)

Forward P/E: 14.30 (Cheap)

P/S 2.18 (Very Good)

P/C 8.31 ( Good)

Quick Ratio 2.93 (Excellent)

Current Ratio 3.08 (Excellent)

Debt/Equity 0% (Excellent)

EPS Growth Past 5 Years 117.6% (Excellent)

Sales Growth Past 5 Years 14.4% (Very Good)

Quarterly Sales Growth 48.9% (Excellent)

Quarterly EPS Growth 89% (Excellent)

ROA 24.52% (Excellent)

ROE 35.36% (Excellent)

ROI 31.88% (Excellent)

Gross Margin 35.43% (Very Good)

Profit Margin 13% (OK)

Short Float: 30.63% (Amazing)

EPS PAST 5 YEARS (16.4% annually)

2007 0.46

2008 0.43

2009 1.42

2010 1.46

2011 2.09

As you can see, its numbers are quite desirable to any investor's eye, with a list full of positive figures. The EPS is growing at a speedy but stable pace, just right for me. The 31% short float is just a bonus, as short-covering will only drive prices higher. Furthermore, not many analysts are covering this stock. This is an extra advantage. Wall Street has not found this jewel yet. On the technical aspect, it pulled back from a high of $58 to its current price of $41. The pullback was due to the stopped order collections because of overwhelming demand. The recent pullback gives investors a chance to buy it. It also has a dividend of 1.97%.

Market Cap: 787.45M

Sales: 365.71M

Income: 47.55M

Cash Per Share: $5.00

Book Value: $7.82

No Cheaper Choice, EZCORP (NASDAQ:EZPW)

EZCORP is a pawn shop, I am attracted by its cheap valuations of 6.9X 2013 earnings, a level not seen since the 2008 to 2009 recession.

Here is a bit of what it does:

EZCORP, Inc. provides specialty consumer financial services. The company offers pawn loans that are non-recourse loans collateralized by tangible personal property, including jewelry, consumer electronics, tools, sporting goods, and musical instruments, as well as sells merchandise consisting of second-hand collateral forfeited from its pawn lending activities or purchased from customers, and new or refurbished merchandise from third party vendors. It also provides a range of financial services, such as signature loans consisting of payday loans, installment loans, and lines of credit; and auto title loans, which include single payment auto title loans, and auto title lines of credit. In addition, the company offers fee-based credit services to customers seeking loans; and advice and assistance to customers in obtaining loans from unaffiliated lenders, as well as provides debit cards. As of September 30, 2011, it operated a total of 1,111 locations consisting of 433 pawn stores under the EZPAWN or Value Pawn names, and 436 financial services stores under the EZMONEY name in the United States; 178 pawn stores under the Empeo Fcil or Empee Su Oro names in Mexico; 49 financial services stores under the CASHMAX name in Canada; and 15 financial and retail services stores under the Cash Converters name in Canada. Further, the company operates as a franchisor for 13 franchised Cash Converters stores in Canada. EZCORP, Inc. was founded in 1989 and is headquartered in Austin, Texas.

Here are some numbers:

12-mth Trailing P/E: 8.51 (Very Cheap)

Forward P/E: 6.95 (Very Cheap)

P/S 1.27 (Very Good)

P/C 25.12 ( Good )

Quick Ratio 2.78 (Excellent)

Current Ratio 3.61 (Excellent)

Debt/Equity 18% (Very Good)

EPS Growth Past 5 Years 28.5% (Excellent)

Sales Growth Past 5 Years 22.4% (Excellent)

Quarterly Sales Growth 20.18% (Excellent)

Quarterly EPS Growth 15.41% (Very Good)

ROA 16.44% (Excellent)

ROE 20.67% (Excellent)

ROI 18.66% (Excellent)

Gross Margin 61.99% (Excellent)

Profit Margin 14.82% (OK)

Short Float 5.05% (NA)


2007 0.88
2008 1.21
2009 1.42
2010 1.96
2011 2.43

The numbers here, like the first stock, are quite desirable to the investor's eye too. These are the kind of stocks I am looking for. On the technical aspect, if you take a look at the chart I put up below, EZCORP 's stock price has fell quite a big deal from a high of $33 to its current price of $23.37. The large gap in late April was mainly because of an earnings miss. This was mainly due to the dwindling amount of people using gold as collateral. They now use other things that the company accepts, from electronic products to sporting goods. Even though the incident reduced earnings and profit margins, it is still growing at a comfortable rate. I also think that the earnings miss is obviously overblown. A 30% pullback is no joke, but this just creates opportunity for investors to buy.

Market Cap: 1.20B

Sales: 942.39M

Income: 139.51M

Cash Per Share: $0.93

Book Value: $14.83

The Next Ross (NASDAQ:ROST), Gordmans Stores (NASDAQ:GMAN)
For those familiar with Ross Stores , it is a stock which offers off-price retail apparel and it has been very successful over the last 10 years. Gordmans' services are around the same. It sells apparel, furniture and other accessories, more like a combination of Ross Stores and Bed Baths And Beyond (NASDAQ:BBBY). Its IPO was in 2006 and is just starting up, and I see that it has lots of potential for growth in the future from the numbers I will list later.
Here is what it does:

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 decor, 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.

Here are some numbers:

12-mth Trailing P/E: 13.25 (Cheap)

Forward P/E: 10.14 (Cheap)

P/S 0.60 (Excellent)

P/C 8.22 (Very Good)

Quick Ratio 0.88

Current Ratio 1.93 (Very Good)

Debt/Equity Ratio 1% (Excellent)

EPS Growth Past 5 Years 49.86% (Excellent)

Sales Growth Past 5 Years 5.58% (OK)

Quarterly Sales Growth 13.84% (Very Good)

Quarterly EPS Growth 9.66% (Very Good)

ROA 16.22% (Excellent)

ROE 35.61% (Excellent)

ROI 29.17% (Excellent)

Gross Margin 42.73% (Very Good)

Profit Margin 4.51% (Not Good)

Short Float 1.28% (N/A)


2007 0.13
2008 0.15
2009 0.99
2010 0.89
2011 1.30

More good numbers on this stock. I like the cheap valuation and the low debt (Long Term Debt: 189K). This low debt tells investors that the company earns enough to fund all its operations. This is a good sign. Gordmans , like EZCORP , has also pulled back quite considerably from its high. I am unsure why there was a pullback after better-than-expected earnings, but this stock, like the two other stocks mentioned, gives investors and opportunity to buy great stocks at low prices.

Market Cap: 352.01M

Sales: 574.66M

Income: 25.96M

Cash Per Share: $2.16

Book Value: $4.45


The Budding Apparel Company, rue21 (NASDAQ:RUE)

rue21 is a small-cap apparel company whose EPS is growing nicely and steadily. Sales and other aspects are going good too. That is the main reason why I like this stock.

Here is a bit about it:

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 May 24, 2012, it operated 809 stores in 46 states. rue21, inc. was founded in 1976 and is headquartered in Warrendale, Pennsylvania.

Here are some numbers:

12mth trailing P/E: 15.75 (Cheap)

Forward P/E: 12.40 (Cheap)

P/S 0.79 (Excellent)

P/C 7.69 ( Good)

Quick Ratio 0.75 (OK)

Current Ratio 1.63 (Very Good)

Debt/Equity 0% (Excellent)

EPS Growth Past 5 Years 34.27% (Excellent)

Sales Growth Past 5 Years 27.51% (Very Good)

Quarterly Sales Growth 18.94% (Excellent)

Quarterly EPS Growth 20.35% (Excellent)

ROA 12.37% (Excellent)

ROE 29.90% (Excellent)

ROI 21.55% (Excellent)

Gross Margin 37.71% (Very Good)

Profit Margin 5.16% (OK)

Short Float: 19.76% (Amazing)

EPS PAST 5 YEARS (23.5% annually)

2007 0.40

2008 0.55

2009 0.96

2010 1.21

2011 1.55

On the technical side, like the other stocks mentioned, it has also pulled back considerably from its peak. This company has no debt at all, and has not incurred any since 2009. This only shows how stable and fast-growing its earnings are, enough to not borrow any money for three consecutive years. Additionally, its short float is at a really high 19.76%. When investors find the potential of the company, I believe that the short squeeze will bring prices even higher. This pullback gives investors a chance to grab these great stocks at cheaper prices.

Market Cap: 626.0M

Sales: 793.04M

Income: 40.93M

Cash Per Share: $3.34

Book Value: $6.57


Semiconductor Superpower, GT Advanced Technologies (GTAT)

GTAT has fallen almost 50% from its peak in March. Its solid fundamentals and cheap price has attracted me to take a look at it.

Here is a bit of what it does:

GT Advanced Technologies Inc. provides polysilicon production technology and crystalline ingot growth systems, and related photovoltaic (PV) manufacturing services for the solar industry worldwide. It also offers sapphire growth systems and material for the light emitting diode (LED) and other specialty markets. The company's principal products comprise silicon deposition reactors and related equipment, which are used to produce polysilicon for applications in silicon-based solar wafers and cells; directional solidification (NYSEMKT:DSS) furnaces and related equipment used to cast multicrystalline and MonoCast crystalline silicon ingots, which are used to make PV solar wafers and cells; and sapphire crystallization furnaces, which are used to crystallize sapphire boules for use in the manufacture of LED devices. In addition, it provides equipment, technology, and engineering services for the production and purification of trichlorosilane and silane; and engineering services for the commissioning, start-up, and optimization of its polysilicon equipment and technology, as well as hydrochlorination technology that eliminates the need for silicon tetrachloride converters in polysilicon production. Further, the company sells replacement parts and consumables used in its DSS furnaces and other PV equipment. GT Advanced Technologies Inc. sells its equipment and services to polysilicon producers, solar wafer manufacturers, and sapphire producers through direct sales force and indirect sales representatives. The company was formerly known as GT Solar International, Inc. and changed its name to GT Advanced Technologies Inc. in August 2011. GT Advanced Technologies Inc. was founded in 1994 and is headquartered in Merrimack, New Hampshire.

Here are some numbers:

12mth trailing P/E: 3.36 (Extremely Cheap)

Forward P/E: 14.30 (Extremely Cheap)

P/S 0.61 (Excellent)

P/C 1.67 ( Excellent)

Quick Ratio 0.99 ( Good )

Current Ratio 1.30 (Very Good)

Debt/Equity 23% (Very Good)

EPS Growth Past 5 Years 77.57% (Excellent)

Sales Growth Past 5 Years 73.89% (Excellent)

Quarterly Sales Growth 30.29% (Excellent)

Quarterly EPS Growth 61.39% (Excellent)

ROA 16.24% (Excellent)

ROE 68.79% (Excellent)

ROI 33.69% (Excellent)

Gross Margin 44.66% (Very Good)

Profit Margin 19.19% (OK)

Short Float: 23.06% (Amazing)

EPS PAST 5 YEARS (37% annually)

2007 0.25

2008 0.61

2009 0.60

2010 1.24

2011 1.45

Although it is expected to slow down in 2013, here is some things I like about the company. It has a lot of cash. It has almost $3 in cash per share, when the stock price is only around the $5 mark! Its earnings have been increasing steadily and an upcoming dividend wouldn't be surprising. Additionally, it has a 23% short float. I believe that any good news could spark a short-covering rally, expecially because it is a small $584.60M company.

Market Cap: 584.60M

Sales: 955.71M

Income: 183.4M

Cash Per Share: $2.97

Book Value: $2.80

I find these rock-solid stocks a great bargain for any investor. In uncertain times like these, these are the kind of stocks that are worth buying.

Disclosure: I am long EZPW, RGR, GMAN, RUE.