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Alberto Abaterusso
Alberto Abaterusso
Articles (2147) 

3 Fast-Growing Small Caps

Analysts predict these stocks will keep on improving the bottom line significantly

April 16, 2020 | About:

Wall Street analysts estimate that U.S. consumer spending will continue to rise over the next few quarters, reaching $13.72 trillion around mid-April in 2021, which will reflect a 2.3% advancement from $13.41 trillion reported for the last quarter of 2019. Consumer spending is the largest component of the U.S. GDP.

In a rising consumer spending environment, fast-growing small-cap stocks are positioned very well, taking advantage of the increase in the demand for goods and services. Higher revenues will lead to higher net earnings if financial resources are used in an efficient and effective manner.

Thus, looking for growth opportunities, I have screened for small-cap stocks (which are stocks with a market cap of $300 million to $2 billion) that have increased their trailing 12-month earnings per share (EPS) more than 25% and are predicted by analysts to keep growing their EPS in the years ahead.

Gates Industrial Corp PLC

The first company under consideration is Gates Industrial Corp PLC (NYSE:GTES), a Denver-based manufacturer and worldwide seller of engineered power transmission and fluid power solutions. The stock has a market capitalization of about $2 billion.

Gates Industrial Corp PLC recorded more than 180% growth in its trailing 12-month earnings per share without non-recurring items, rising to $2.37 in full-year 2019 from 84 cents in full-year 2018.

Wall Street sell-side analysts forecast that the EPS of the company will continue to grow by 30.5% next year while the S&P 500, which is a benchmark for the U.S. market, is predicted to post a 20% increase.

As of April, one analyst recommends a strong buy rating, seven analysts recommend a buy rating and one analyst recommends a hold rating for this stock. The average target price is $9 per share.

The current share price ($6.92 as of April 15) seems cheap, as it trades significantly below the Peter Lynch earnings line.

Gates Industrial Corp PLC does not pay dividends.

GuruFocus assigned the company a moderate financial strength rating of 4 out of 10 and a positive profitability rating of 6 out of 10.

Herman Miller Inc

The second company under consideration is Herman Miller Inc (NASDAQ:MLHR), a Zeeland, Michigan-based designer and global distributor of business equipment and supplies. The stock has a market capitalization of about $1.13 billion.

Herman Miller Inc posted a 27.4% growth in its trailing 12-month EPS without NRI, as it rose to $2.7 in full-year 2019, up from $2.12 in full fiscal 2018.

Wall Street sell-side analysts forecast that the EPS of Herman Miller Inc will keep on growing by 50.6% on average every year in the next five years. The S&P 500, which is a benchmark for the U.S. market, is expected to record a 5% increase every year over the next five years.

As of April, two analysts recommend a strong buy rating while another two suggest a hold rating for this stock. The average target price is $23 per share.

The share price ($19.25 at close on April 15) currently trades substantially below the Peter Lynch earnings line.

Herman Miller Inc paid a quarterly cash dividend of 21 cents per common share on Jan. 15 for a dividend yield of 3.22% as of April 15.

GuruFocus assigned the company a positive financial strength rating of 6 out of 10 and a high profitability rating of 8 out of 10.

Lynas Corp Ltd

The third company under consideration is Lynas Corp Ltd (LYSCF), a Malaysian rare earth minerals explorer, developer and miner with assets located in the homeland as well as in Australia. The stock has a market capitalization of $726.9 million.

Lynas Corp Ltd posted a 33.4% growth in its trailing 12-month EPS without NRI, rising to 8 cents in full-year 2019, up from 6 cents in full-year 2018.

Wall Street sell-side analysts forecast that the company will increase its EPS tremendously next year. It is projected to hit 13 cents in 2021, up from a 3 cents estimate for full fiscal 2020, which will end on June 29, 2020 for the company.

As of April, two analysts recommend a buy rating for this stock with an average target price of $3.68 per share.

Currently, the share price ($1.01 as of April 15) trades near the Peter Lynch earnings line, suggesting that this stock is not expensive.

Lynas Corp Ltd does not pay dividends.

GuruFocus assigned a positive rating of 5 out of 10 for the company’s financial strength and a moderate profitability rating of 4 out of 10.

Disclosure: I have no positions in any securities mentioned.

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About the author:

Alberto Abaterusso
I am a contributor at GuruFocus. I primarily write about gold, silver and precious metals mining industries. My articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. I hold a Master's Degree in Business Administration from Università degli Studi di Bari (Italy), Aldo Moro. I am based in The Netherlands.

You can follow me on Twitter at https://twitter.com/AAbaterusso

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