America's Car-Mart Inc. (NASDAQ: CRMT) and Multi-Color Corporation (NASDAQ: LABL) are scheduled to come up with their quarterly results next week and this could be the right time to play these stocks. Both companies have strong fundamentals and the shares are not aggressively priced, which make them good candidates for a rally after results announcement.
America's Car-Mart is one of the few organized players catering to the used car market in the United States. The company operated 131 stores as of January 2014 and had plans to open four more by the end of the financial year. The company has been growing its presence by opening more stores, although the dropping contribution from older stores is a cause of concern.
In the latest quarter, the company's revenue was up 3.1 percent as unit sales went up by 2.1 percent. The company has a debt equity ratio of 0.55 which is only moderate for this capital intensive business. America's Car-Mart has an active share repurchase program under which it bought back 2.2 percent of the outstanding shares during the quarter. The downside in the stock looks limited as it has already come off the high levels of last year and currently trades just 10 percent above its 52-week low. A forward price earnings ratio of 12, along with a 23 percent discount on price by sales ratio, is also a compelling proposition. Since expectations are running thin, average performance on key metrics may also bring investors.
Multi-Color Corporation is in a niche business of label solutions. The company has a global portfolio of clients to which it offers various label technologies including pressure sensitive, glue-applied (cut and stack), in-mold, shrink sleeve and heat transfer.
At a debt equity ratio of 1.4, the company has a leveraged balance sheet, but it is putting the debt capital to good use. In the latest quarter ended 31 December 2013, the company reported a 51 percent surge in earnings to $8.8 million. This was no fluke in the December quarter as earnings are up 19 percent for the nine months as well. Understandably, the stock jumped after results announcement, but has seen a correction lately. From its 52-week high level of $39.3 last month, the stock has come down nearly 13 percent to $34.3 per share. Technically, the stock is not in the oversold or overbought zone while fundamentally, its forward price earnings ratio of 14.3 indicate there is head room left for further growth.