Top 3 Small Caps Over 3 Months
Small cap stocks have done very well of late, but what are the top 3 small cap stocks over the last 3 months based on return and are Zacks #1 Rank (Strong Buy) or Zacks #2 Rank (Buy)?
Let's take it from the bottom to the top in order of performance... that way we can build a little suspense. For those of you that want a little more information of what makes a stock a #1 Rank or a #2 Rank. This is our Zacks Rank page for a further description.
Corinthian Colleges (Nasdaq: COCO) is a post-secondary education company in operating the United States and Canada. As of June 30, 2011, the Company had a student enrollment of 93,457 and operated 106 schools in 26 states, and 16 schools in the province of Ontario, Canada.
COCO has moved higher on the strength of a sizeable earnings beat. The company reported the December 2011 quarter in early February. Revenues of $415 million were $2 million ahead of the Zacks Consensus Estimate and EPS of $0.04 were $0.03 ahead of the Zacks Consensus Estimate. That is a 300% beat which pushed the stock higher by an amazing 44%. It should also be noted that the broader market saw a large advance on the same day earnings were released.
Estimates have moved higher for COCO.
Prior to the recent beat, the Zacks Consensus Estimate was calling for 2012 earnings of $0.23. Following the report, that number rose to $0.32. That is a 39% increase and something that investors tend to reward stock for. Similarly, estimate for 2013 also moved higher. In January 2012, the estimate for 2013 stood at $0.43 and following earnings the new Zacks Consensus Estimate is now $0.56.
Multiples are still quite low.
You would think a stock that has moved higher by 95% over the last twelve weeks would have sky high multiples for the major metrics most investors follow. That is not the case for COCO. Forward PE of 13x would bring most value players to the table for the discussion and they may even start to salivate when they hear that the company trades at 0.64x book. That is some real value still to be realized!
COCO is up 95% in the last 12 weeks.
Artic Cat (Nasdaq: ACAT) is our second biggest small cap performer over the last 12 weeks. Once again, a strong earnings report can be pointed to as a major driver for the growth.
Arctic Cat, Inc. operates in a single industry segment and designs, engineers, manufactures and markets snowmobiles and all-terrain vehicles under the Arctic Cat brand name, as well as related parts, garments and accessories. The company markets its products through a network of independent dealers.
ACAT reported earnings on January 26, 2012 and posted a huge blowout. Revenue of $207 million was $25 million or 13% ahead of the Zacks Consensus Estimate and an increase from the $152 million reported in the year ago period.
Earnings per share of $0.92 were $0.34 or 58% ahead of the Zacks Consensus Estimate and almost double the $0.50 recorded the same period last year. As a result of this blowout, the stock moved higher by 28% following the report.
Estimates Moving Higher
Before the blowout, the Zacks Consensus Estimate for ACAT was calling for 2012 earnings to be $1.22. After the report analysts adjust numbers higher to $1.68, or a 38% increase. The same can be said of expectations for 2013 as analysts were looking for $1.84 in December of 2011, moved to $2.33 and are currently looking for $2.44 or a 33% increase.
Valuation for ACAT
Investors can expect a stock that has doubled in 12 weeks to trade at a premium to its industry. While that is true for ACAT there is at least one metric that still shows some room for growth. Price to sales of 0.88x still shows that there could be more room for growth in ACAT, especially when compared to the industry average of 0.74x. Even when looking at forward PE, ACAT does not look widely outpriced at 23x next twelve months earnings.
ACAT is up 103% in the last 12 weeks.
Halcon Resources (Nasdaq: HK) is the best performer that is a Zacks Rank #2 (Buy). Logic would tell you that the other top 3 performers had solid earrings beats, and that HK must have really blown out the quarter. Once again, logic would be wrong. HK has missed, and missed badly on its last two quarters.
Halcon Resources is an independent energy company, engages in the acquisition, production, exploration, and development of onshore oil and natural gas properties in the United States.
So why up so much? Well a recapitalization of RAM Energy Resources clouds the picture. HK made an investment in RAM which is comprised of $275 million in new common stock, a $275 million five-year convertible note, and warrants for the purchase of an additional 110 million shares of common stock.
Upon closing of the transaction, RAM will issue 220 million shares of common stock to Halcon, representing approximately 74% of RAM's pro forma outstanding common stock. The $275 million convertible note will bear interest at 8% per annum and may be converted by the holder into shares of common stock at any time subsequent to two years from the closing date, subject to earlier conversion under certain circumstances. The conversion price will be $1.50 per share, subject to adjustment upon certain events. The warrants will be exercisable for five years from the closing date at an exercise price of $1.50 per share, subject to adjustment upon certain events.
HK is up 172% in the last 12 weeks.
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