The saying that there is neither good publicity nor bad publicity, but only publicity, applies in large measure to companies such as Amazon Inc., Google Inc., and Netflix Inc. and a number of others that thrive on continual media exposure.
A MarketWatch article looked at the claims of some smaller cap companies that don't enjoy the same degree of publicity.
The high flying stocks that are currently getting all the attention of analysts and investors alike prompted a Wall Street Journal article headlined “The Only Six Stocks That Matter”. This article referred to Google (GOOGL, +1.10%), Amazon (AMZN, -0.21%), Facebook, (FB, +0.14%), Gilead Sciences (GILD, +1.48%), Netflix (NFLX, -1.53%) and Apple (AAPL, -2.36%) as the stocks that account for most of the gains recorded in major indices this year.
While this small number of stocks showing real growth allows investors to be very selective, there are a number of stocks that fly below the radar and don't receive the analyst and investor attention they deserve. These are all “small” cap companies with a market capitalization of less than $10 billion.
The first of these is Fitbit which only went public in June at $20 per share, getting a lot of publicity at the time when its stock opened at $30 per share, a premium of 50% above the IPO. Fitbit is currently trading in the $45 to $48 range which means that the stock has leapt in value by 248% since late June for a market cap of $9.3 billion.
Fitbit facts reveal that the company is the market leader in the rapidly expanding fitness wearables market with a solid record of making profits.
Filings indicate that the first quarter revenue of $337 million was three times the revenue of $109 million for Q1 a year earlier. At the same time, the earnings per share surged almost six times to 33 cents from 6 cents. The reason for the big growth in EPS was an increase in gross margin to an impressive 50% over the 41% recorded a year earlier.
As MarketWatch puts it, “if you want to jump into the next consumer tech trend, Fitbit is the way to go.”
The second recommendation is for leisure shoe maker Skechers USA (SKX, -1.20%) which has gone up close to 170% this year and almost 350% since the beginning of last year to be trading at the $150 level. Despite the price surge, this stock is still a bargain based on an analysis of its valuation metrics.
The company delivered its Q2 report last week revealing that it had doubled its profits year-on-year despite strong dollar headwinds on exports. Revenue growth for the quarter was an enviable 36%.
International sales have increased by 60% with foreign revenue now accounting for almost one third of the total.
Skechers has a forward price-to-earnings ratio of only 27 which is a modest premium for a continuing impressive performance. In addition, the company trades at just 2.3 times next year’s projected sales. Growth is expected to continue during the balance of 2015 with the stock performance expected to keep pace with that growth.
The last company to come under the microscope is action camera manufacturer GoPro (GPRO, +0.26%) which has not enjoyed the same surge in stock value as Fitbit and Skechers, being 2% down in value over the year.
The stock has however increased by 60% above its low in March which provides a possible entry point for new investors.
Recent earnings have been a great cause for optimism as the net income increased to 24 cents in adjusted earnings per share from a loss of 24 cents in the same period last year.
The success secret for GoPro lies in its international expansion with foreign revenues matching those in the United States. In addition to expanding its geographical sales area, the company is also expanding its product range.
Most importantly, the R&D costs involved in the increase of the product range have not come at the expense of profits. The third quarter guidance from the company is an EPS of 29 to 32 cents, above the 22 cents forecast by Wall Street.
Buy GoPro stock with confidence while projections of a 15% to 30% surge in the price might be quite conservative with the sort of growth expected from GoPro, according to MarketWatch.