By Hassan
Malik
Valuations
for high-growth small caps have fallen 20% since the January 2014. Today, they
are once again below their long-term average levels. But as Forbes’s Jim
Obrewies puts it: “Investors would be foolish to give up on small cap stocks.” In
reality, small cap stocks have had a history of outperformance relative to
large caps. Furthermore, small caps stocks are known to perform relatively
better when the GDP accelerates. Fortunately for investors, many analysts are
suggesting that cheap oil will be the catalyst for earnings growth, which will
contribute to driving GDP forward in 2015. With that in mind, here are 3 small
cap stocks investors may want to look at:
Inphi Product Offerings (NYSE: IPHI):
The company delivers innovative solutions to create a unique end-to-end
platform for both transport and signal integrity from fiber to memory. Inphi is
recognized for its advanced analog circuit design, signal integrity, power
management, packaging and process technologies. The international demand for
data from high-speed LTE communications is pushing the need for the expansion
of faster fiber networks and faster communication within cloud data centers. Last
October, Inphi acquired Cortina Systems for $131 million. The close of the
acquisition reinforces Inphi’s market leading position for high-speed optical
and networking interconnects. About 75% of Inphi’s business is booming and
riding the wave of 100-gigabit optical network adoption. According to Forbes,
investors can expect revenues to grow 85% in 2015, both due to organic growth
from 100G adoption and from the Cortina acquisition. Shares trade for 21 times
forward earnings of $0.90 per share.
MiMedx Group (NASDAQ: MDXG):
MiMedx is the global premier processor, marketer, and distributor of human
amniotic tissue. It is focused on the development of patent-protected
regenerative bio-implants and biomaterials from placentas. Instead of wasting
placentas from child birth, MiMedx processes them to produce a safe and
effective implant. For instance, its wound-care product EpiFix is a tissue
graft used for the treatment of conditions like diabetic foot ulcers. EpiFix is
ahead of its competition with respect to efficacy, speed of healing and cost. According
to Forbes, MiMedx is growing revenues at 75% organically, and profits are
growing even faster. The firm’s large growth opportunity explains its steep
valuation at 53 times our forward estimate of $0.15 in earnings per share.
Tarena International, Inc. (NASDAQ: TEDU):
Beijing based Tarena International is the leading provider of professional
services in China with its core strength focused on information technology
professional education services. Teachers deliver lessons from a classroom in
Beijing that is simulcast at its learning centers throughout China. According
to Forbes, growth is being driven by additional learning centers and expansion
into new verticals, such as digital arts. Shares trade at 19 times our forward
earnings-per-share estimate of $0.62, for 35% earnings growth.
Disclaimer: This article was posted with
the permission of a third-party contributor and the opinions contained
therein do not necessarily reflect those of SmallCapPower. SmallCapPower
does not endorse any investment advice provided by these third-party
contributors.
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