For investors who seek out growth opportunities, stocks at the small cap level provide plenty of options. But it is necessary to take some precaution as these stocks tend to be less sturdy and can be more volatile than their mid and large cap peers. Risk can be minimized to an extent by focusing on traits that portend future growth. To find stocks of that nature, we searched specifically for those that have EPS growth rates of over 25% and a high level of liquidity. This combination indicates that a company has the funding on hand to fuel the growth projections. Take a look at the list below of small cap stocks to start your investigation.
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).
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.
We first looked for small cap stocks. From here, we looked for companies that have a substantial amount of cash on hand (Current Ratio>2)(Quick Ratio>2). Next, we screened for businesses that have high future earnings per share growth forecasts(1-year projected EPS Growth Rate>25%). We did not screen out any sectors.
Do you think these small-cap stocks will go up in price? Use our list along with your own analysis.
1) EZchip Semiconductor Ltd. (EZCH)
|Industry||Semiconductor - Integrated Circuits|
|1-Year Projected Earnings Per Share Growth Rate||55.00%|
EZchip Semiconductor Ltd., a fabless semiconductor company, develops and markets Ethernet network processors for networking equipment. Its network processors include processing and classifying engines, traffic managers, media access controllers, and various hardware blocks, which enable customers to design multi-port line cards. The company's network processors are also used to form the silicon core of networking equipment, such as switches and routers; and for voice, video, and data integration in various applications.
In addition, it offers network processor chips; evaluation boards and network-processor based systems that enable customers to test network processor units based systems; and development software toolkits, which assist customers in creating, verifying, and implementing solutions based on the company's network processors. Further, the company provides a library comprising Metro Ethernet protocols, Multi-Protocol Label Switching, IPv4 and IPv6 routing, Access Control Lists, GPON/EPON OLT functionality, Network Address Translation, and Server Load Balancing that features data plane code for various applications.
It serves networking equipment vendors through direct sales representatives, contract manufacturers, and distributors primarily in Israel, China, Hong Kong, the Far East, Canada, the United States, and Europe. The company was formerly known as LanOptics Ltd. and changed its name to EZchip Semiconductor Ltd. in July 2008. EZchip Semiconductor Ltd. was founded in 1989 and is headquartered in Yokneam, Israel.
2) Audience, Inc. (NASDAQ:ADNC)
|Industry||Semiconductor - Integrated Circuits|
|1-Year Projected Earnings Per Share Growth Rate||38.60%|
Audience, Inc. provides intelligent voice and audio solutions for mobile devices worldwide. The company's platform consists of proprietary, purpose-built digital signal processors, analog and mixed signal circuits, and algorithms for voice isolation and noise suppression. Its voice and audio solutions comprise eS305, a second generation voice and audio processor utilizing hardware acceleration architecture and algorithms for far-field wideband communications; eS310 that provides flexible connectivity to adjacent components, including analog and digital interfaces; and A1026 and A1028 that are first generation narrowband voice processors designed for real-time communications and typical near-field use.
The company offers the earSmart eS305, eS310, A1026, A1028, and custom voice and audio processors for device platforms, including smartphones, feature phones, and media tablets. Its voice and audio processors are also used in other market segments, including automobile infotainment systems, digital cameras, digital televisions, headsets, and set top boxes. Audience, Inc. sells its voice and audio processors to original equipment manufacturers and their contract manufacturers through its direct sales force, third-party sales representatives, and distributors. The company was formerly known as Applied Neurosystems Corporation and changed its name to Audience, Inc. in June 2002. Audience, Inc. was founded in 2000 and is headquartered in Mountain View, California.
3) Sycamore Networks Inc. (NASDAQ:SCMR)
|Industry||Networking & Communication Devices|
|1-Year Projected Earnings Per Share Growth Rate||25.70%|
Sycamore Networks, Inc., together with its subsidiaries, engages in the development and marketing of intelligent bandwidth management solutions worldwide. It provides SN 16000 and SN 9000 optical switches that enable bandwidth management in regional and core optical networks; SILVX network management system, which offers comprehensive performance management services; DNX cross-connect platforms for traffic aggregation and grooming handle narrowband to broadband switching and transport; and ENvision Plus network management software for path protection and disaster recovery.
The company also provides IAB-3000 integrated access bank and SPS-1000 signaling process systems, which support voice and data integration at end-user sites and in telemetry applications; and DNX-1u access gateways for improving site visibility and control. In addition, it develops and markets IQstream mobile broadband optimization solutions to help operators in reducing congestion in mobile access networks. Further, the company offers post-sales customer support services, such as network planning and deployment, logistics, product training, software updates, online technical assistance, and maintenance contracts. It sells its products to wireline and wireless network service providers, utility companies, large enterprises, multiple systems operators, and government entities through its direct sales force. Sycamore Networks, Inc. was founded in 1998 and is headquartered in Chelmsford, Massachusetts.
4) Park Electrochemical Corp. (NYSE:PKE)
|Industry||Printed Circuit Boards|
|1-Year Projected Earnings Per Share Growth Rate||30.58%|
Park Electrochemical Corp., through its subsidiaries, develops, manufactures, markets, and sells high-technology digital and radio frequency/microwave printed circuit material products primarily for the telecommunications, and Internet infrastructure and high-end computing markets worldwide. The company also provides composite materials, parts, and assemblies for the aerospace markets. Its printed circuit materials fabricate complex multilayer printed circuit boards and other electronic interconnection systems, such as multilayer back-planes, wireless packages, high-speed/low-loss multilayers, and high density interconnects.
The company markets its printed circuit material to printed circuit board fabricators, electronic manufacturing service companies, electronic contract manufacturers, and electronic original equipment manufacturers in the computer, networking, telecommunications, wireless communications, transportation, aerospace, military, and instrumentation industries. Park Electrochemical Corp. was founded in 1954 and is headquartered in Melville, New York.
5) Universal Display Corp. (NASDAQ:PANL)
|1-Year Projected Earnings Per Share Growth Rate||164.52%|
Universal Display Corporation engages in the research, development, and commercialization of organic light emitting diode (NASDAQ:OLED) technologies and materials for use in flat panel display, solid-state lighting, and other product applications. It owns exclusively license or has the sole right to sublicense approximately 1,400 patents issued and pending worldwide. The company licenses and supplies its proprietary UniversalPHOLED phosphorescent OLED technologies and materials to display manufacturers and others.
It is also involved in the research, development, and commercialization of other OLED device and manufacturing technologies, including TOLED, which are transparent OLEDs for the fabrication of OLEDs that have transparent cathodes; FOLED that are flexible OLEDs for the fabrication of OLEDs on flexible substrates; OVPD, an organic vapor phase deposition process to deposit the layers of organic material in an OLED; UniversalP2OLED, which are printable phosphorescent OLEDs; OVJP that is an organic vapor jet printing technology; and encapsulation technology for the packaging of flexible OLEDs and other thin-film devices, as well as for use as a barrier film for plastic substrates.
In addition, the company provides technology development and support services to third parties for the commercialization of their OLED products. It has strategic relationships with Samsung Mobile Display Co., Ltd.; LG Display Co., Ltd.; AU Optronics Corporation; Sony Corporation; Pioneer Corporation; Panasonic Idemitsu OLED Lighting Co., Ltd.; Tohoku Pioneer Corporation; Moser Baer Technologies, Inc.; Konica Minolta Holdings, Inc.; Denko K.K.; LG Chem, Ltd.; Panasonic Electric Works Co., Ltd.; NEC Lighting, Ltd.; Seiko Epson Corporation; DuPont Displays, Inc.; and Plextronics, Inc. The company was founded in 1985 and is based in Ewing, New Jersey.
6) Wesco Aircraft Holdings, Inc. (NYSE:WAIR)
|Industry||Industrial Equipment Wholesale|
|1-Year Projected Earnings Per Share Growth Rate||26.60%|
Wesco Aircraft Holdings, Inc. distributes and provides supply chain management services to the aerospace industry in the United States and internationally. The company's services range from traditional distribution to the management of supplier relationships, quality assurance, kitting, just-in-time delivery, and point-of-use inventory management. It offers approximately 475,000 different stock keeping units consisting of C class aerospace hardware, bearings, electronic components, and machined parts.
The company's hardware products include blind fasteners, panel fasteners, bolts and screws, clamps, hi lok pins and collars, hose assemblies, hydraulic fittings, inserts, lockbolts and collars, nuts, rivets, springs, valves, and washers; and bearings comprise airframe control bearings, rod ends, spherical bearings, ball bearing rod ends, roller bearings, and bushings. Its electronic components consist of connectors, relays, switches, circuit breakers, and lighted products; and machined parts and other parts include brackets, milled parts, shims, stampings, turned parts, welded assemblies, and installation tools. Wesco Aircraft Holdings serves approximately 7,200 customers in the commercial, military, and general aviation sectors comprising the OEMs and their subcontractors. The company, formerly known as Wesco Holdings, Inc., was founded in 1953 and is headquartered in Valencia, California.
7) Oplink Communications Inc. (NASDAQ:OPLK)
|Industry||Semiconductor - Integrated Circuits|
|1-Year Projected Earnings Per Share Growth Rate||57.83%|
Oplink Communications, Inc., together with its subsidiaries, designs, manufactures, and sells optical networking components and subsystems worldwide. The company's products are used to expand optical bandwidth, amplify optical signals, monitor and protect wavelength performance, redirect light signals, ensure signal connectivity, and provide signal transmission and reception within an optical network. It offers bandwidth creation products, such as wavelength expansion products comprising dense wavelength division multiplexers (DWDM), coarse wavelength division multiplexers, band wavelength division multiplexers, and DWDM interleavers; and optical amplification products consisting of gain blocks, erbium doped fiber amplifiers, wavelength division multiplexers pump/signal combiners, integrated hybrid components, WDM pump combiners, polarization beam combiners, gain flattening filters isolators, isolators, and tap couplers.
The company also offers bandwidth management products, such as optical switching and routing products comprising optical add/drop multiplexers, wavelength selective switches, reconfigurable OADMs, switches, and circulators; wavelength conditioning products that include variable optical attenuators, variable multiplexers, and dynamic band equalization products; and wavelength performance monitoring and protection products consisting of supervisory channel WDM, integrated WDM and tap monitor arrays, optical channel monitors, and wavelength protection subsystems. In addition, it provides optical interconnect products, including connectors and adapters, fixed attenuators, patchcords, and termination and distribution enclosures; and transmission products, such as small form-factor pluggable transceivers, XFP transceivers, CWDM transceivers, bi-directional transceivers, DWDM transceivers, optical supervisory channel transceivers, GEPON products, and 40G/100G transceiver products. The company was founded in 1995 and is headquartered in Fremont, California.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on August 23, 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.