Hey there, Fools. We're back again to help you identify some of the most attractive micro-cap stocks worthy of your investment dollars. Just as a reminder, we do this because:
- Underfollowed micro-cap companies offer great returns -- and sometimes even the best returns.
- Wall Street is covering fewer stocks than ever before, making now a great time to start looking for tiny treasures.
- Micro-cap stocks can burn if you don't do your homework, so we try to shed more light on the asset class for you.
Microscopic surgery
This column uses our Motley Fool CAPS community intelligence database to turn up promising stocks. The system asks amateur and professional investors alike to rate stocks either "outperform" or "underperform." In turn, each investor is rated, as is each stock.
The end result is that while only huge companies like Cisco Systems (Nasdaq: CSCO ) have more than 15 or 20 analysts following them, CAPS harnesses the ideas of thousands to get at the long tail of the stock market with the same depth of coverage.
Drumroll, please ...
So without further ado, here are five CAPS stocks that sport four or five stars, have market caps between $100 million and $200 million, and are covered by three or fewer professional analysts.
|
Company
|
Market Cap (in millions)
|
Number of CAPS Ratings
|
Analysts
|
Current Analyst Recommendation
|
|
Silicom (NASDAQ:SILC)
|
$150
|
66
|
One
|
Hold
|
|
PRG-Schultz International
|
$147
|
82
|
One
|
Strong Buy
|
|
California
First National Bancorp (NASDAQ:CFNB)
|
$145
|
11
|
None
|
N/A
|
|
International Shipholding (:ISH)
|
$138
|
46
|
One
|
Strong Buy
|
|
Thomas Group (NASDAQ:TGIS)
|
$109
|
199
|
None
|
N/A
|
Data from Yahoo! Finance and Motley Fool CAPS.
As always, don't view these stocks as hearty formal recommendations, but rather as appetizing starters for further analysis. Agreed?
Now that we have that settled, Thomas Group and Silicom might just be a pair of small wonders worthy of your Foolish due diligence.
Little improvement
As investors, we all want our companies to generate cash and drive higher profitability. Well, Thomas Group, a Texas-based provider of process improvement services, helps businesses do just that. Judging by the 76 All-Stars that are bullish on Thomas (impressive for such a tiny company), Thomas seems to be pretty good at it, too.
Thanks to a capital-light business model and a blue-chip roster of clients -- including the likes of Pfizer (NYSE: PFE ) and Motorola -- Thomas has consistently generated whopping returns on capital above 50%. When you consider that between Chairman John Chain and Director Edward Evans, the two own over 60% of the company, this type of efficiency is understandable.
With about $10 million in cash, no long-term debt, and a tasty dividend yield of 4.20%, TGIS looks intriguing.
CAPS All-Star wolfienola adds:
I think this consulting company has an interesting business model. They have an excellent reputation among their clients and get a high percentage of repeat business. I have listened to the most recent conference call and I was impressed with the unflashy solid presentation.
SILC-y smooth
Silicom is another stock in the long tail that piques the interest of our community. Like Thomas Group, the Israeli networking company has received impressive support from CAPS All-Stars: 32 have called "outperform," while not a single one is bearish. Of course, a mere glance at Silicom's recent growth rates gives us a major chunk of the bullish argument.
Over the last five years, Silicom has grown revenues at compounded rate of 49%. Given that Silicom essentially models itself after two semiconductor behemoths -- Intel (Nasdaq: INTC ) and Broadcom -- monstrous growth shouldn't come as a huge surprise. In its latest quarter, sales were up 82%, while net income increased 346%.
The stock is up an unbelievable 255% year over year, but with a forward P/E of 21, it's not out of the question that SILC may just keep soaring.
CAPS player yanivf penned this pitch back in April:
Explosive earnings year-over-year in a growing industry, very low float, no coverage. Has had an awesome run of late, but only now has gotten to a 25 P/E (currently stands at 29). Has got a ways to go.
Are we on the same micro-wavelength?
But, of course, the real question is whether you believe these companies are real micro marvels or just small shrimps waiting to get squished. Log on to CAPS and let us know how you feel.
It's absolutely free and, within seconds, you'll have access to thousands of potential stock ideas. Join now -- more teeny tiny treasures await their discovery.
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