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10 Small-Cap Stocks With Positive Earnings Trends - 10818 views
The following commentary comes from an independent investor or market observer as part of TheStreet’s guest contributor program, which is separate from the company’s news coverage. The opinions expressed are those of the author and do not represent the views of TheStreet or its management.
NEW YORK (Scott's Investments) -- Below are 10 small-cap stocks that have positive earnings trends and are priced reasonably based on price-to-earnings-growth. I use stockscreen123 as the tool for this particular screen. The basic premise of the list is that stocks with a history of earnings surprises have the strong probability of positive earnings surprises in the future. If the stocks are already trading at favorable valuations, then continued earnings surprises could mean that the stocks below are undervalued.
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Last month's list suffered greatly due to the overall market selloff. The list tends to be high-beta and could be more volatile than the overall market. However, it is not a comprehensive portfolio but rather a starting point for further research and an attempt to uncover some "hidden" gems.
Multi-Color (LABL), which provides label solutions, tops this month's list. It trades at a forward P/E of 9.72 and a trailing P/E of 13.33. It has a PEG ratio of 0.89. First quarter highlights from July 28 include:
• Net revenue increased 36% to $100.6 million from $74.1 million compared to the three months ended June 30, 2010. Net revenues increased 29% or $21.8 million in the three months ending June 30, 2011, due to acquisitions and start-ups that occurred after June 30, 2010. The remaining increase was due to a 5% favorable impact of foreign exchange rates primarily driven by the strengthening Australian dollar, a 1% increase in sales volumes and a 1% favorable pricing impact.
• Diluted earnings per share (EPS) increased to 66 cents per diluted share from 30 cents. Excluding the impact of the special items noted below, adjusted EPS increased 65% to $0.66 cents per diluted share from 40 cents. Net income attributable to Multi-Color Corporation increased to $8.9 million from $3.7 million in the prior year quarter. Adjusted for special items, net income attributable to Multi-Color increased to $9 million from $5 million in the prior year quarter.
Datalink (DTLK) is fifth on this month's list. DTLK engages in the design, installation, and support of data center solutions to mid and large-size companies. The company recently reported earnings on July 20. The company had revenues for the quarter ending $89.5 million vs. $70.9 for the prior year period. The company had GAAP earnings of $.16/diluted share versus breakeven for the second quarter last year.
The company provided guidance for the third quarter:
• Based on the company’s backlog and sales pipeline we expect revenue to be between $85 million and $90 million for the third quarter of 2011 and we expect third quarter 2011 net earnings to be between 12 cents and 16 cents per diluted share on a GAAP basis, and net earnings to be between 15 cents and 19 cents per diluted share on a non-GAAP basis. This compares to revenues of $69.2 million in the third quarter of 2010. GAAP net earnings per share in the third quarter of 2010 were 6 cents and non-GAAP net earnings per share were 11 cents per share.
From a technical perspective the stock looks to be hitting resistance at $11 with support around $9 a share.
Weekly chart courtesy of Finviz.
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