2 Sub-$1 Billion Companies With No Debt and Plenty of Upside Potential

I have had my watchful eye on two stocks that are highlighted on occasion, but do not receive the type of coverage that names like Apple get from market pundits and investing enthusiasts. Although each company has a market of or below $1 billion, I believe Control4 (NASDAQ: CTRL  ) and iRobot (NASDAQ: IRBT  ) have a lot of upside potential -- to be fair, Control4 has a very, very marginal amount of debt, but we'll explore that in more detail below. 

Evaluating these stocks differently
When you're taking a look at tomorrow's technology today, you can't rely on backward-looking results. The true story for these stocks aren't told when using certain traditional Wall Street metrics, such as the trailing price-to-earnings ratio. 

For example, Control4 and iRobot trade at 101.5 times and 40 times their trailing-12-month P/E ratios, respectively. To the average value investor, these metrics seem insane. But when you look at the forward P/E ratios of Control4 and iRobot, we get a much more reasonable 23 times and 25 times earnings, respectively.

When I look at these stocks, I have to look at them on a forward basis, like I did with the P/E ratio. I wrote an analysis on iRobot earlier this month, where I explained to readers that the market cap is also a valuable tool for investors. 

I can reasonably envision iRobot trading with a market cap of $3 billion-$5 billion within five years, based on the increasing adoption of robotics both in the home and in the work place. A $5 billion valuation is not egregious either, especially for a company that trades at 23 times 2015 earnings, with earnings per share expected to grow 28% that year. 

Risks
Of course, usually more risk is involved with smaller companies. There is less stock on the open market, and therefore, lower trading volumes. Stocks with low volumes tend to be more volatile and this is something risk-adverse investors should consider. They also don't have as much weight to throw around like the mega cap stocks worth $100 billion or more. Competition, large shareholders, and supply constraints or pricing power can really weigh these smaller companies down. 

But that doesn't mean these companies aren't worth your hard-earned cash. Control4 and iRobot are two companies that I think have many positive qualities, and are in the infancy of several markets that will continue to outpace the broader market for years to come. 

Please enjoy this slideshow that details why I like these companies:

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Leaked: Apple's Next Smart Device
(Warning, it may shock you)
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