Investing, for most of us, is all about growth. Frankly, we want our money to grow and bring in strong returns, and so we look for stocks with the best prospects for such growth. These don’t have to be the stocks that have been picking up the most recommendations in recent weeks, or the stocks that have outperformed the market in the past six months – those are good signs to look for, but sometimes, you need to dig a little deeper to find the stocks that are just getting ready to take off.
This is where TipRanks’ Stock Screener comes in. The screener is a versatile tool with an array of filters to search over 6,000 stocks on the public markets. With a bit of creativity, you can find buying prospects in most of the categories. Today, we’ve found three companies from the smaller end of the stock market, the micro, small, and mid-cap stocks that don’t get as much press or Wall Street attention. They all hold unanimous Strong Buy consensus ratings from the analysts, so they deserve a look.
Asure Software, Inc. (ASUR)
We’ll start in the tech industry, with a micro-cap software company. Asure provides resources and solutions for human capital management (HCM), today’s catch phrase for the old HR department. The company’s systems can perform payroll, track attendance and time, as well as monitor and manage recruitment efforts, employee benefits, and insurance services. Asure believes that a smoothly running workplace bureaucracy will translate into easier workdays and satisfied employees, for everyone’s benefit.
Business software and management systems are a profitable niche – no company can do without it, and once a provider has positioned itself as indispensable to its clients, it has a path to success. Asure’s Q3 numbers, while somewhat mixed, show an overall picture of such growth.
First, recurring revenues gained in Q3, and pushed total sales to $24.6 million, missing the estimates but beating the year-ago number by 4.7%. EPS, at 11 cents, beat the estimates, although it was down year-over-year. Margins slipped a little, but remained robust at almost 66%. Asure finished the quarter with almost $13 million in cash and cash equivalents. ASUR shares are up 57% in 2019, more than double the gains of the S&P 500 index.
Lake Street analyst Eric Martinuzzi is suitably impressed ASUR’s performance. He wrote, earlier this month, “The company's recurring revenue is in excess of 90% of total revenue and the midpoint of its 2020 guidance anticipates $73M revenue and 15.7% adjusted EBITDA margin. [We view] Asure Software as an underappreciated turnaround story sustaining double-digit organic growth.” Backing up his upbeat review of the stock, Martinuzzi gives ASUR a Buy rating and a $12 price target, indicating room for a 50% upside. (To watch Martinuzzi’s track record, click here)
ASUR’s Strong Buy consensus rating is based on 5 Buys set in the past two months. The fact that the Street sees this stock as primed for growth can be seen from the average price target, which at $11.80 suggests a 48% upside from the current share price of $8.00. (See Asure’s stock analysis at TipRanks)
ViaSat, Inc. (VSAT)
Software is great for on-site use, but the digital world requires secure communications. ViaSat is a mid-cap provider of secure networking systems and high-speed satellite broadband services. The company has clients in both the commercial and military markets. Based in Carlsbad, California, near San Diego, ViaSat has a market cap of $4.4 billion.
Despite a slip in share price for the company in 2H19, the VSAT stock is still up 21% for the year. Its most recent earnings report, for fiscal Q2 2020, beat the forecasts for both revenues and earnings. The top line came in at $592.3 million, a solid number that beat the estimates by 4.2% and the year-ago figure by 14%. EPS did even better, showing a 5-cent profit where analysts had expected a 12-cent loss. It was the fourth quarter in a row that VSAT had beaten the estimates.
5-star analyst Richard Valera, from Needham, wrote after the quarterly report, “VSAT reported strong F2Q20 results that exceeded our model across all metrics, aided by earlier than expected receipt of some Gov't business… A continued focus on adding fewer, higher-bandwidth plan retail subs and an improving mix of higher bandwidth service plans is driving … revenue growth on flattish net subs.” Valera kept his Buy rating on the stock, while setting a price target of $90 for a 26% upside. (To watch Valera’s track record, click here.)
Also bullish on VSAT is J.P. Morgan analyst Philip Cusick. He gave the stock an upgrade, raising his view of it from Neutral to Buy on expectations that the shares will outperform the market in the coming months. Cusick also gave VSAT shares a 7% increase in the price target, to $90. (To watch Cusick’s track record, click here)
VSAT picked up 3 Buy reviews after last month’s Q2 report, giving the stock its Strong Buy consensus rating. Shares are priced at $71.58, but the average target is $108, suggesting a robust 51% upside potential. (See ViaSat’s stock analysis at TipRanks)
Energy Recovery, Inc. (ERII)
This specialized industrial tech company focuses on energy recycling and efficiencies in fluid industries. That sounds like a mouthful, but it’s easily explained: ERII develops systems to improve high pressure pumps as well as to derive usable energy from differences in liquid pressures and compositions.
OK, that’s still a mouthful. But what you need to know is that Energy Recovery fills a necessary niche in the seawater desalination and the oil and gas industries. The company’s products allow pumps and piping systems to run more efficiently. And that niche has pushed ERII stock to a 39% year-to-date gain.
The stock has been volatile in 2H19 however, as the company has experienced serious churn in upper management. This was the second year in a row that ERII saw the CEO leave on short notice. It was no surprise, then, that ERII was expected to miss the forecasts on the Q3 earnings. The actual numbers told a different story, however, with stronger than anticipated results. EPS clobbered the forecast, coming in at 7 cents against the expected 2 cents, while the quarterly revenues of $24.9 million, showed year-over-year growth of 12%.
Evercore analyst James West sees plenty of potential for ERII, despite the unfortunate management turnover. He notes that the company has plenty of projects to develop, writing, “ERII continues to strengthen its backlog of Water projects and sees additional opportunities in the pipeline that it invested into expanding its manufacturing capabilities. This backlog visibility also provided management with the confidence to give some rough revenue guidance for its Water segment for growth of at least 20-25% in 2020 and an additional 10-15% in 2021.” In line with his optimism on the stock, West gives ERII a Buy rating, and his $16 price target implies strong 71% upside growth in the coming year. (To watch West’s track record, click here)
Overall, ERII shares have 4 recent Buy ratings to back the Strong Buy consensus view. The average price target of $14 suggests a premium of 50% from the current trading price of $9.35. (See Energy Recovery’s stock analysis at TipRanks)