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The Most Undervalued Small-Cap Service Stocks

  +Follow January 10, 2014 9:16AM
Tickers Mentioned:

The service sector often does not get the attention of some of its flashier cousins in Tech and Financials, but service stocks can offer a nice opportunity for retail investors looking for an overlooked investment opportunity. But which plays within the service sector are unjustly overlooked, and which are rightly-ignored dogs?

To find that out, we went looking for small-cap (worth between $300 million and $2 billion) service stocks that met four separate benchmarks that we felt indicated an investment poised for growth. They are:

1)      The company must have a profit-to-earnings ratio less than 15.

A low P/E indicates a company is making more money than their stock is worth. Of course, the correlation doesn’t always work out that way, but a  P/E under 15 indicates that there is a good chance that there is some undervaluation going on.

2)      The company must have a forward P/E of less than 15.

We wanted to find companies that are not just undervalued now, but look to continue to be so in the future.

3)      The company must be expected to grow EPS by at least 25 percent over the next year.

A high earnings-per-share (EPS) growth indicates that the company can be expected to become more profitable in the near future. And everyone likes to invest in companies that are expected to become more profitable.

4)      The company does not pay a dividend.

Small-cap service stocks pay a dividend because they cannot figure out how else to spend the money. Service companies, especially when they are growing, are better off spending money on advertising than on placating investors with a cash dividend.

After applying this criteria to the market, we found four small-cap service stocks we felt had a chance for experiencing growth in the coming year. They are:

VOXX International Corporation (VOXX)

Market Cap: $338.03 million

Price: $14.00

VOXX is a consumer electronics corporation based out of New York. Formerly known as Audiovox, the company manufactures commercial and consumer electronic accessories and audio equipment. While the company’s fundamentals might be string, ti should be noted that the stock dropped 17 percent on Jan. 9 on a poor earnings report.  

StealthGas Shipping (GASS)

Market Cap: $328.86 million

Price: $10.26

As their name implies, this Greek shipping company specializes in the transportation of petroleum and petrochemical gas products. The company sports an impressive forward P/E of 8.59 and yearly EPS growth of 67.37 percent.


Market Cap: $594.94 million

Price: $10.97

EZCORP is one of the largest pawn shop chains in the world, providing high-interest loans to a predominantly low income clientele. EZCORP got hammered in 2013, losing nearly half its value. However, the stock was recently upgraded by Zacks to “neutral” and sports a very impressive forward P/E of 5.98

Eros International plc (EROS)

Market Cap: $332.17 million

Price: $10.94

Eros International distributes movies from “Bollywood,” India’s fast-growing movie making sector. Eros just went public in late 2013. The service play has already attracted attention from investors looking to cash in on India’ entertainment boom. Eros sports very strong fundamentals, including an exceptional low P/E of 5.58, and an analyst consensus of “strong buy.”

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.

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Results for VOXX
1 Sep 14 08:56:35
VOXX : Energy Introduces First Soundbar in Connoisseur ® Series http://t.co/qG3dRCBBil $VOXX
28 Aug 14 15:26:20
RT @VexTrades: 8/28 Watchlist: $ALIM, $VOXX, $BWEN, $NPD, $HNR, $TC, $VIP, $WYY. http://t.co/IDMBKZbbz5
Craig S.
28 Aug 14 11:43:59
@JFinDallas $VOXX owns a chunk of 360fly…the camera itself is cooler than any GPRO camera, but GPRO has the name for now!
John Harrell
28 Aug 14 09:48:52
$VOXX - their 360Fly will be a GoPro $GPRO killer and it launches next month. http://t.co/q735dH1mx1
27 Aug 14 22:06:37
RT @VexTrades: 8/28 Watchlist: $ALIM, $VOXX, $BWEN, $NPD, $HNR, $TC, $VIP, $WYY. http://t.co/IDMBKZbbz5
Stock Market News
27 Aug 14 18:53:52
$VOXX: Car-audio manufacturer VOXX may expand in Orlando http://t.co/O0UqiKpf16 http://t.co/6dazyQiEDB
John Beckwith
27 Aug 14 17:54:25
RT @VexTrades: 8/28 Watchlist: $ALIM, $VOXX, $BWEN, $NPD, $HNR, $TC, $VIP, $WYY. http://t.co/IDMBKZbbz5
27 Aug 14 17:37:17
RT @VexTrades: 8/28 Watchlist: $ALIM, $VOXX, $BWEN, $NPD, $HNR, $TC, $VIP, $WYY. http://t.co/IDMBKZbbz5
27 Aug 14 16:50:33
RT @fm23: $VOXX http://t.co/5payFzCB9Z
Phil Martin
27 Aug 14 16:49:43
$VOXX http://t.co/5payFzCB9Z
27 Aug 14 16:03:59
SmallCap #Stocks Trend $RSH $CLUB $EXPR $REX $FOLD $SNSS $BAGR $ARO $AAOI $ISLE $GMAN $CETV $VOXX more@ http://t.co/Giravo3fg9
Ryan LaRue
27 Aug 14 14:47:08
RT @VexTrades: 8/28 Watchlist: $ALIM, $VOXX, $BWEN, $NPD, $HNR, $TC, $VIP, $WYY. http://t.co/IDMBKZbbz5
27 Aug 14 14:46:01
RT @VexTrades: 8/28 Watchlist: $ALIM, $VOXX, $BWEN, $NPD, $HNR, $TC, $VIP, $WYY. http://t.co/IDMBKZbbz5
Daily Contracts
27 Aug 14 14:21:01
Real-Time feed of company contracts, original agreements and executive updates from Voxx International $VOXX http://t.co/adpUOrKZBl
Brandon Hayward
27 Aug 14 14:17:16
8/28 Watchlist: $ALIM, $VOXX, $BWEN, $NPD, $HNR, $TC, $VIP, $WYY. http://t.co/IDMBKZbbz5
27 Aug 14 13:44:34
Top Services Small-Cap Star for August 27 is Diversified Restaurant Holdings Inc. (BAGR) $VOXX $TA $GMAN $ARO $BAGR http://t.co/vqwiwBEFxX
Day Trade Alerts
25 Aug 14 10:57:29
via #AlertTrade SHORT Seller Alert $VOXX - VOXX INTL #ShortSeller #Stocks http://t.co/VS8RO1bzXJ
Market Monitor
25 Aug 14 04:53:37
$VOXX: Law Offices of Marc S. Henzel Announces Securities Class Action Periods http://t.co/120Ke7agKC http://t.co/pzAE6Cl8H2
  +Follow January 10, 2014 9:16AM



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