A Cheap and Growing Microcap You’ve Never Heard Of
40% net margins. 15 years of growing dividends.
Key Metrics:
39% net profit margin
YoY growth
Annual dividend raised every year since 2009
No debt
P/E ratio of 9 (but really more like 5)
Valuations in the US market have gotten a little out of hand.
Most mid- and large-caps are trading at streched multiples, inflated by years of low rates and excessive government spending.
Anyone following the markets has seen the endless memes of Jerome Powell and his money printer.
But behind the jokes lies a simple truth: most big stocks are anything but cheap.
That’s why I’ve been focusing on names that are trading out of the spotlight, off the beaten path, so to speak. These days, mostly small and quiet microcaps.
When I screen for new stocks with growing earnings and low or no debt, I often include a criterion for low trading volume. It may sound odd, but that’s how you can find companies that are off the radar. And in today’s market, that’s where the best opportunities are hiding.
The stock I’m writing about today checks all those boxes.
It trades at a low earnings multiple, carries no debt, and holds an interesting investment portfolio worth about half its entire market cap. It’s also raised its annual dividend every year since 2009.
In other words: this is the kind of setup that still makes sense in an expensive market.
A classic value play.
A quick note on liquidity
Before we dive in, it’s important to note that this investment idea comes with added risk due to its illiquidity.
The company currently has a market cap of just $78 million. Average daily trading volume is under 2,000 shares, and it’s not uncommon for the stock to go an entire day without a single trade.
So, when purchasing any thinly traded stock like this, a market order for even a few hundred shares can move the price by 5% or more in a single transaction. That’s why spreads need to be taken into consideration.
With that out of the way, let’s take a look.