For investors looking for good play on potentially undervalued stocks in the consumer sector with opportunities for growth over the next year, the following five companies may be of interest. These small cap companies sport market caps of under $2 billion, along with strong earnings-per-share growth over the past five years of upwards of 25 percent. Furthermore, their low price-to-free-cash flow ratios (generally, under 15) ostensibly indicate that these companies have the cash to do things that are of benefit to investors, such as offering good dividend yields and/or reinvesting in acquisitions or revenue streams in such a way as to ensure that EPS growth stays on a robust trajectory in the long-term.
Keep in mind that the EPS growth rates considered below are an average of the past five years. In other words, to get a better idea of how solid this growth has been, it may be better to use more specific numbers that reflect how steady or not this growth has been on a year-to-year or even quarter-to-quarter basis.
Finally, all of these stocks have analyst ratings of “buy or better”.
Cooper Tire & Rubber Co. (CTB) – The Akron, Ohio rubber and plastics manufacturer has a market cap of $1.64 billion, with shares currently priced at $26.03. The company has an EPS growth rate for the past five years of 41.7 percent, and a P/FCF ratio of 5.69.
KapStone Paper and Packaging Corp. (KS) – The South Carolina-based paper and packaging company has a market cap of $1.2 billion, with shares currently selling at $25.78. Its EPS growth rate for the past five years is a generous 119.72 percent, while its P/FCF ratio is 13.10.
LeapFrog Enterprises Inc. (LF) – The tech-based designer and manufacturer of educational toys headquartered in Emeryville, California has a market cap of $582.38 million with shares trading at $8.61. Its EPS growth for the past five years is a whopping 244.60 percent, with a P/FCF ratio of 13.63.
Standard Motor Products Inc. (SMP) – The Long Island City, New York based auto parts maker has a market cap of $550.19 million with shares trading at $24.11. Its shares have grown at a rate of 40.82 percent over the last five years, while its P/FCF ratio is 9.06.
Schweitzer-Mauduit International Inc (SWM) – The Alpharetta, Georgia-based designer and producer of cigarette papers and cigar wrappers has a market cap of $1.14 billion with shares trading at $36.84. EPS growth for the past five years is at 80.98 percent, with a P/FCF ratio of 9.21.
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