5 Highly Liquid Small Cap Stocks Projected For Strong Growth

by: ZetaKap

When it comes time to prepare the soil for planting, experienced gardeners know that it is essential to apply a generous amount of rich compost and plenty of water. Without proper preparations, seeds are unlikely to flourish. Small cap companies are a bit like those seeds. They need a strong foundation to support the maturation process. An indicator that a company is well prepared for growth is an ample supply of cash. High levels of liquidity point to companies that have the discipline to save and the understanding that drawing upon reserves may be necessary to achieve growth. For our list today, we focused on small caps that have an appealing level of cash reserves and estimated EPS growth rates above 25% for the next five years. We think you will find these stocks worthy of additional research.

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, and may indicate that the company 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 stocks. Next, we then screened for businesses with estimated high-growth, with 5-year projected EPS growth above 25%. We then screened for businesses that have a substantial amount of cash on hand (Current Ratio>2)(Quick Ratio>2). We did not screen out any sectors.

Do you think these small cap stocks have strong enough fundamentals to move higher? Please use our list to assist with your own analysis.

1) DexCom, Inc. (NASDAQ:DXCM)

Sector Healthcare
Industry Medical Instruments & Supplies
Market Cap $1.02B
Beta 1.09

DXCM stock chart

Key Metrics

5-Year Projected Earnings Per Share Growth Rate 31.75%
Current Ratio 4.95
Quick Ratio 4.52
Short Interest 9.91%

DexCom, Inc., a medical device company, focuses on the design, development, and commercialization of continuous glucose monitoring systems for ambulatory use by people with diabetes, and for use by healthcare providers in the hospital for the treatment of both diabetic and non-diabetic patients. The company was founded in 1999 and is headquartered in San Diego, California.

2) Cadence Pharmaceuticals Inc. (CADX)

Sector Healthcare
Industry Biotechnology
Market Cap $340.53M
Beta 1.35

CADX stock chart

Key Metrics

5-Year Projected Earnings Per Share Growth Rate 34.00%
Current Ratio 3.74
Quick Ratio 3.58
Short Interest 7.50%

Cadence Pharmaceuticals, Inc., a biopharmaceutical company, focuses on acquiring, in-licensing, developing, and commercializing proprietary product candidates principally for use in the hospital setting in the United States and Canada. Cadence Pharmaceuticals, Inc. was founded in 2004 and is headquartered in San Diego, California.

3) Triangle Petroleum Corporation (NYSEMKT:TPLM)

Sector Basic Materials
Industry Independent Oil & Gas
Market Cap $326.12M
Beta 2.28

TPLM stock chart

Key Metrics

5-Year Projected Earnings Per Share Growth Rate 35.00%
Current Ratio 2.66
Quick Ratio 2.65
Short Interest 11.28%

Triangle Petroleum Corporation engages in the acquisition, exploration, and development of unconventional shale oil resources in the Bakken Shale and Three Forks formations in the Williston Basin of North Dakota and Montana. The company primarily holds interests in approximately 83,000 net acres in McKenzie and Williams Counties of North Dakota, and Roosevelt and Sheridan Counties of Montana. It also holds an 87% working interest in approximately 412,924 net acres of oil and natural gas leases in the Windsor Sub-Basin of the Maritimes Basin located in Nova Scotia, Canada. The company was formerly known as Peloton Resources Inc. and changed its name to Triangle Petroleum Corporation in May 2005. Triangle Petroleum Corporation was incorporated in 2001 and is based in Denver, Colorado.

4) Luminex Corporation (NASDAQ:LMNX)

Sector Healthcare
Industry Medical Instruments & Supplies
Market Cap $801.17M
Beta 0.58

LMNX stock chart

Key Metrics

5-Year Projected Earnings Per Share Growth Rate 37.45%
Current Ratio 7.90
Quick Ratio 6.61
Short Interest 10.07%

Luminex Corporation engages in the development, manufacture, and sale of proprietary biological testing technologies and products for the life sciences and diagnostic industries. It offers xMAP technology, an open architecture and multiplexing technology that allows simultaneous analysis of approximately 500 bioassays from a drop of fluid by reading biological tests on the surface of microscopic polystyrene beads called microspheres. The company was founded in 1995 and is headquartered in Austin, Texas.

5) Syneron Medical Ltd. (NASDAQ:ELOS)

Sector Healthcare
Industry Medical Appliances & Equipment
Market Cap $350.56M
Beta 1.45

ELOS stock chart

Key Metrics

5-Year Projected Earnings Per Share Growth Rate 35.00%
Current Ratio 2.82
Quick Ratio 2.35
Short Interest 0.69%

Syneron Medical Ltd., together with its subsidiaries, engages in the research, manufacture, development, marketing, and sale of aesthetic medical products worldwide. Syneron Medical Ltd. was founded in 2000 and is headquartered in Yokneam Illit, Israel.

*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 10/08/2012.

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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