10 Small-Cap Value Opportunities

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Below are 10 small cap stocks with a positive earnings trend and priced reasonably based on price to earnings growth. I use stockscreen123 as the tool for this particular screen. The basic premise of the list is that stocks with a history of earnings surprises have the strong probability of positive earnings surprises in the future. If the stocks are already trading at favorable valuations, then continued earnings surprises could mean that the stocks below are undervalued.

Last month I featured Standard Motor Products (SMP) and since that time the stock is up 14.99%. The company manufactures and distributes replacement parts for motor vehicles in the automotive aftermarket industry. The company reported better than expected earnings in May, with 1st quarter revenue up 23% from last year and earnings of $.31, 72% higher than the consensus estimate.

The company is trading at a forward P/E of 10.15 and PEG ratio of .58. The company also has no long-term debt and a total debt/equity ratio of .33. It is projected to grow earnings over the next five years at 21.3%.

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This month's list has some familiar names, among them the aforementioned SMP, Kadant (KAI), which was featured two months ago, Rocky Brands (RCKY), LTX-Credence (LTXC). Regarding KAI, the stock is consolidating near a critical resistance level of $32-33/share, which it hit this month, in May, and also in 2007. Failure to break above its recent highs in the coming days could mean that a pullback is imminent and may present an upcoming buying opportunity for patient investors. A move above $33/share would be very bullish for the stock (monthly chart below):

Chart courtesy of Finviz

Rocky Brands currently has a "Graham Number" of $19.47. The Graham number is calculated by taking the square root of 22.5 x Book Value Per Share x Earnings Per Share. In theory, $19.47 could be considered "fair" valuation although there are other considerations when trying to assess fair valuation of a company. The company has a current P/E of 10.22 and a forward P/E of 7.55 and has a price to earnings growth (PEG) ratio of 1.02. It has strong historical support around $11/share (weekly chart):

Ticker	Name	Rank	MktCap	PEGLT	ProjPECurFY
JST	Jinpan International Limited	98.73	196.58	0.33	9.75
RCKY	Rocky Brands, Inc.	98	91.08	0.86	8.6
KND	Kindred Healthcare, Inc.	97.9	851.39	0.79	10.94
TITN	Titan Machinery Inc.	97.28	555.3	0.71	15.69
KAI	Kadant Inc.	95.74	395.82	0.68	14.36
LAD	Lithia Motors, Inc.	94.83	531.32	0.47	13.56
SMP	Standard Motor Products, Inc.	94.64	359.43	0.52	11.06
LTXC	LTX-Credence Corporation	93.96	403.15	0.45	7.26
CRD.B	Crawford & Company	93.5	343.5	0.77	11.55
TPCG	TPC Group, Inc.	91.96	668.73	0.56	14.37

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