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3 Small-Cap Stocks Growing Earnings Fast

ABM Industries Inc tops the list

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Alberto Abaterusso
Mar 18, 2020
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The U.S. gross domestic product (GDP) is expected to continue to expand in 2020, but at a slower growth rate of 2.4% compared to 3.2% in 2019 due to the economic disruption of the novel coronavirus outbreak.

Consumer spending, which is the largest factor in the GDP equation, is predicted to be the main driver this year, with forecasters projecting it at $13.734 trillion before the first quarter of 2021, marking a 2.4% rise from the $13.41 trillion we had for the final quarter of 2019.

Amid U.S.-listed stocks, investors may want to consider the following three small caps, as they have grown their earnings quickly. Wall Street analysts also forecast they will outperform the S&P 500 index (which is a benchmark for the U.S. market) in terms of EPS growth over the next five years.

In my opinion, these U.S. small caps have the potential to catch strong tailwinds as soon as markets are no longer negatively affected by the coronavirus.

ABM Industries

The first company under consideration is ABM Industries Inc (

ABM, Financial), a New York-based specialty business services company with a market capitalization of around $1.88 billion.

ABM Industries posted a nearly 32% rise in the trailing 12-month EPS without non-recurring items to $1.91 as of full fiscal 2019, which ended on Oct. 30, 2019. This markes an increase from $1.45 in full fiscal 2018.

The share price was trading at $28.22 at close on Tuesday, which is below the 200-, 100- and 50-day simple moving average lines.

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GuruFocus assigned the company a moderate financial strength rating of 5 out of 10 and a very positive profitability rating of 7 out of 10.

The stock has a price-earnings ratio of 13.25 versus the industry median of 13.12 and a price-sales ratio of 0.29 versus the industry median of 0.77.

Wall Street sell-side analysts forecast that the company will increase its net EPS by 16% per year over the next five years versus the S&P 500’s 7% growth rate.

Analysts issued an overweight recommendation rating for this stock with an average target price of $42.67.

Currently, ABM Industries pays a quarterly cash dividend of 18.5 cents per common share which, based on Tuesday’s closing price, produces a forward dividend yield of 2.62%. The next payment will be made on May 4.

Kratos Defense & Security Solutions

The second company under consideration is Kratos Defense & Security Solutions Inc (

KTOS, Financial), a San Diego, California-based provider of mission-critical solutions and services to the U.S. and international aerospace and defense industries. The stock has a market capitalization of about $1.23 billion.

Kratos Defense & Security Solutions grew its trailing 12-month EPS without NRI to 10 cents in the full fiscal year 2019, up 150% from 4 cents in full fiscal 2018.

The share price traded at $11.49 at close on Tuesday. Following a 30% decrease so far this year, it is below the 200-, 100- and 50-day simple moving average lines.

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GuruFocus assigned the company a moderate financial strength rating of 5 out of 10 and a moderate profitability rating of 5 out of 10.

The stock has a price-earnings ratio of 89.25 versus the industry median of 16.79 and a price-sales ratio of 1.63 versus the industry median of 1.01.

Wall Street sell-side analysts forecast the company’s EPS will grow by 13% every year over the next five years.

Analysts recommend a buy rating for this stock and have set an average target price of $21.83 per share.

FBL Financial Group

The third company under consideration is FBL Financial Group Inc (

FFG, Financial), a West Des Moines, Iowa-based life insurer with a market capitalization of about $937.34 million.

FBL Financial Group increased its trailing 12-month EPS without NRI by 35.7% to $5.09 in full fiscal 2019, up from $3.75 in full fiscal 2018.

The share price closed at $38 on Tuesday, and as a result of a 43% drop over the past year now trades below the 200-, 100- and 50-day simple moving average lines.

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GuruFocus assigned a low rating of 3 out of 10 for the company’s financial strength but a moderate profitability rating of 5 out of 10.

The stock has a price-earnings ratio of 7.51 versus the industry median of 9.49 and a price-sales ratio of 1.22 versus the industry median of 0.83.

Sell-side analysts on Wall Street estimate that the company will be able to increase its EPS by 14.2% per year over the next five years.

Analysts issued an overweight recommendation rating for this stock with an average price target of $47 per share.

Currently, FBL Financial Group Inc pays a quarterly cash dividend of 50 cents per common share, which generates a 5.26% forward dividend yield as of March 17.

Disclosure: I have no positions in any securities mentioned.

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