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3 Small Caps Trading with Low Forward PE Ratios

March 15, 2013 11:03 am
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3 Small Caps Trading with Low Forward PE Ratios

Value investors tend to focus on a few key metrics. Classically, these include price-to-earnings ratios, price-to-book ratios, dividend yield and debt load.

Forward PE ratios are a measure of a stock’s price to its estimated future earnings. Low forward PEs can be seen as a measure of relative “cheapness.” When it comes to small caps, Arctic Cat (NASDAQ: ACAT), Crocs (NASDAQ: CROX) and Coinstar (NASDAQ: CSTR) all boast relatively low forward PEs.

Arctic Cat trades with a forward PE near 13
The maker of recreational vehicles is still relatively cheap by a number of metrics, despite shares having rallied over 16% in the last three months. Its forward PE of 13 is low, as is the company’s trailing PE of roughly 15.5.

Unfortunately, the company pays no dividend, but its other financial metrics make it attractive from a valuation perspective. It’s also somewhat of an ancillary play on the strength of the consumer and the broader economy. Frankly speaking, the company makes expensive toys, and with the U.S. economy showing signs of life, the future could be bright for Arctic Cat.

Crocs has a forward PE near 9.5

Years ago, this boat shoe-maker was a darling stock that ultimately proved to be a bubble. After once trading near $70, Crocs shares rapidly collapsed in late 2007, and now trade around $16 per share.

But down here, Crocs might be fairly valued. With a forward PE of 9.5, and a trailing PE near 11, Crocs could be a bargain.

Again, the company pays no dividend, and its shoes have clearly lost the buzz the company once enjoyed. Still, its hard to argue with the numbers. With the hype behind it, perhaps Crocs can continue to be a solid, silent performer.

Coinstar’s forward PE is around 10

Long ago, Coinstar shifted its focus from its namesake business to its subsidiary Redbox. Along with Netflix (NASDAQ: NFLX), Coinstar’s Redbox may have helped to push once dominant Blockbuster Video into bankruptcy.

But shorts have piled onto Coinstar, projecting that once again, the movie rental business would undergo a shift, this time from disc rentals to full online streaming.

Like Crocs, Coinstar has low trailing and forward PEs. The company’s forward PE is near 10, while its trailing PE is only above 12. It pays no dividend, but its price-to-book ratio of 3 is less than one-fourth of Netflix’s 14.

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