Actionable insights straight to your inbox

Equities logo

Five Undervalued Small-Cap Service Stocks

The service industry does not garner quite the market attention of tech and healthcare. But growth is growth, and there are plenty of service-oriented companies capable of garnering major returns
Jacob Harper received his BA from the University of Missouri in 2005, and his MA in Writing from Missouri State in 2009. He's written for American Express, Wisebread, LA Foodie, and Fox Digital, and he served as a Writer & Editor for the 2013 Los Angeles edition of the guidebook series Not For Tourists. Jacob currently lives in Los Angeles.
Jacob Harper received his BA from the University of Missouri in 2005, and his MA in Writing from Missouri State in 2009. He's written for American Express, Wisebread, LA Foodie, and Fox Digital, and he served as a Writer & Editor for the 2013 Los Angeles edition of the guidebook series Not For Tourists. Jacob currently lives in Los Angeles.

The service industry does not garner quite the market attention of tech and healthcare. But growth is growth, and there are plenty of service-oriented companies capable of garnering major returns even if they’re not on the cusp of releasing a nifty new gadget or garnering FDA drug approval.

To isolate service plays we felt might be poised to grow, we applied three pieces of criteria.

Methodology

We wanted to find small cap stocks that possessed solid fundamentals, high marks from analysts, and a chance for growth based on a classic value investing formula. Here’s the specifics we used to delineate the plays we felt might grow in 2014:

#1 The company has to be included in our Small-Cap Stars project.

In creating our Small-Cap stars portfolio. Equities.com required service stocks to meet certain benchmarks, like having a large percentage of institutional holdings.

#2 Analyst consensus is at least a “buy” on the stock.

While we trust our own metrics, it doesn’t hurt to have the agreement of a majority of analysts on certain obscure plays.

#3 The company’s PEG ratio is less than one.

PEG ratio is simply price/earnings divided by annual EPS growth. Companies with a PEG ratio less than 1 are thought to be undervalued by the market, and the lower the PEG the more undervalued the company is.

Findings

We found five service plays that fit this model. They are:

Lakes Entertainment (LACO)

Industry: Resorts and Casinos

Market Cap: $124.19 million

Price: $4.72

PEG Ratio: 0.39

Celadon Group Inc. (CGI)

Industry: Trucking

Market Cap: $460.66 million

Price: $20.09

PEG Ratio:0.50

 

The Hackett Group (HCKT)

Industry: Management Services

Market Cap: $184.68 million

Price: $6.03

PEG Ratio: 0.89

PC Connection Inc. (PCCC)

Industry: Catalogue & Mail Order House

Market Cap: $631.72

Price: $24.14

PEG Ratio: 0.58

Navios Maritime Holdings Inc. (NM)

Industry: Shipping

Market Cap: $967.68 million

Price: $9.41

PEG Ratio:0.59

A weekly five-point roundup of critical events in the energy transition and the implications of climate change for business and finance.