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3 Fast-Growing Small Caps

GuruFocus.com

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 considered the largest component of the U.S. GDP.

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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This article first appeared on GuruFocus.