Small Cap Strategist is published by Crystal Equity Research an independent research resource on small capitalization stocks. Follow along as we discuss the most recent trends in the small-cap sector, investigate interesting companies and pan a few not-so-promising stocks.
Everybody likes a
bargain.Investors really like a good
cheap buy.A review of our four
alternative energy industries revealed several stocks trading below industry average
multiples of forecasted earnings.
couple of weeks ago shares of Kadant,
Inc. (KAI:NYSE) registered
an particularly bullish formation-at least from a technical standpoint.A ‘triple top breakout’ was formed in a point
and figure chart, suggesting demand for the stock outpaces supply.Given the new momentum that has developed,
the stock could reach as high as $52.00, representing 25% upside potential.
is trying to clean up the paper production industry with more efficient virgin
pulp processing equipment and recycling solutions.The company also makes biodegradable
absorbent granules from papermaking by-products for agriculture, lawn,
ornamental and industrial uses.The company
earned a 10.8% operating profit margin on $391.7 million in revenue in the most
recently reported twelve months.
who follow Kadant expect the company to deliver as much as 20% earnings growth
over the next five years.That is
impressive and we would expect to have to pay as much as 20 times earnings to
buy KAI.Yet the stock is trading at
18.4 times trailing earnings and 13.5 times earnings predicted for 2015.A current dividend yield of 1.4% makes the
stock seems even more appealing.
discussion today might be more or less academic.A technical indicator, the Commodity Channel
Index that has served me so well, suggests the stock is overbought at the
current price level-at least temporarily.A review of historical trading patterns
suggests the stock has a fairly well developed line of price support at the $38
price level and another at $34.While it
is not clear if fundamental performance would disappoint investors enough to send
the stock down to the $34 price level, it does seem possible that the stock
could retrace price to the $38 price level.Third quarter results send the stock soaring the day following the
earnings announcement.Any period of
weakness in the broader market could bring the stock back to lower orbit near
$38 per share.For investors with a view
to hold KAI for a period of time should find it worthwhile to wait and watch
for a compelling entry point.
Neither the author
of the Small
Cap Strategist web log, Crystal Equity
Research nor its affiliates have a beneficial interest in the companies