Mainly as a result of higher consumer spending (it is the largest component of the gross domestic product), the U.S. economy expanded at an annualized growth rate of 2.1% in the last quarter of 2019 (advanced estimates show), contributing to the uptrend in the share price of U.S.-listed stocks.
The Russell 2000 Index, which is used as a benchmark for small-cap, U.S.-listed companies, rose by 5.6% over the past year to a price of $1,678.61 per unit at close on Feb. 21. Small-cap companies are those with a market capitalization of $300 million to $2 billion.
The expected increase in US consumer spending (forecasters project a 6.75% rise from $13.4 trillion in the fourth quarter of 2019 to hit approximately $14.3 trillion in the same quarter of 2022) will likely make the net profit of small caps grow, leading the share prices higher.
The following small caps are strongly positioned to take off as they have already grown their last 12-month earnings per share without non-recurring items by at least 25%. Thus, even though past performance is no guarantee of future results, investors may want to consider them.
Cubic
The first company that meets the above-listed criteria is Cubic Corp. (CUB, Financial), a San Diego, California-based designer and operator of systems for command, intelligence, surveillance and reconnaissance with a market capitalization of around $1.95 billion.
Cubic has grown its trailing 12-month earnings per share without non-recurring items by 156.3%. The stock was trading at a price of $62.4 per share on Friday, below the 200-, 100- and 50-day simple moving average lines.
GuruFocus assigned the company a moderate financial strength rating of 5 out of 10 and a positive profitability rating of 6 out of 10.
The stock has a price-earnings ratio of 53.37 versus the industry median of 23.02 and a price-sales ratio of 1.29 versus the industry median of 1.34.
Wall Street analysts forecast the company’s annual earnings will grow by 6.7% this year and by 25.10% in 2021. Sell-side analysts issued a buy rating and an average target price of $75.83 per share.
Cubic currently pays a semi-annual dividend of 13.5 cents per common share, producing a forward dividend yield of 0.43%.
MiX Telematics
The second company that meets the above-listed criteria is MiX Telematics Ltd. (MIXT, Financial), a South African provider of software applications with a market capitalization of about $303.2 million.
MiX Telematics reported 39.4% growth in its trailing 12-month earnings per share without non-recurring items. The share price was trading at $13.8 at close on Friday, below the 200-day simple moving average line but above the 100- and 50-day lines.
GuruFocus assigned the company a high financial strength rating of 8 out of 10 and a very high profitability rating of 9 out of 10.
The stock has a price-earnings ratio of 18.04 versus the industry median of 26.12 and a price-sales ratio of 2.26 compared to the industry median of 2.27.
Wall Street sell-side analysts recommend a buy rating for this stock with an average target price of $24.33.
Currently, MiX Telematics pays a quarterly dividend of 6.7 cents per common share for a forward dividend yield of 1.95% as of Friday.
PaySign
The third company that meets the above-listed criteria is PaySign Inc. (PAYS, Financial), a Henderson, Nevada-based provider of prepaid card programs and processing services to several corporations and organizations with a market capitalization of approximately $459.1 million.
PaySign has grown its trailing 12-month earnings per share without non-recurring items by 120%. The share price was trading at $9.58 at close on Friday, below the 200-, 100- and 50-day simple moving average lines.
GuruFocus assigned a high rating of 8 out of 10 for the company’s financial strength and its profitability.
The stock has a price-earnings ratio of 87.09 versus the industry median of 17.49 and a price-sales ratio of 16.4 versus the industry median of 1.01.
Wall Street sell-side analysts forecast that the company will increase its annual earnings per share by 133.3% this year and by 43% in 2021. Sell-side analysts have issued a buy recommendation rating for this stock and an average price target of $15.25 per share.
PaySign currently does not pay dividends.
Disclosure: I have no positions in any securities mentioned.
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