Small Cap Stocks A Bad Reputation As Being Speculative

Introduction I am no fan of speculating stocks, but for some reason, some small-cap stocks have been given a bad reputation as being speculative. There is a sentiment that small-caps stocks must be considered speculative, even when they present a great opportunity, and because of this reason most small-caps stocks are now grossly overlooked by investors (even when the fundamentals are promising). This reason has made a lot of good value small-cap stocks grossly undervalued. For this reason, I determined what made the company, undervalued and a good pick for 2017, by using a metric checklist. †¢ Earnings: did the company show signs of increasing revenue each year, and can the company continue to increase revenue? †¢ Earnings†¦show more content†¦This is a chart taken from the Financial Times and YCharts Data: From this chart, we can see that the company’s growth rate is not only exceeding analysts expectations but also shows an increasing trend. Their PEG is 0.79 for the trailing twelve months meaning that for this kind of growth the company may be undervalued especially for the kind of EPS it is generating. It is not a good rule of thumb to only look at present growth but how the present growth rate will map out a picture for the future growth rate. RETURN On Equity IRobot has had a slight decrease in ROE for the 12 trailing months, with its current average ROE for the course of the trailing twelve months being 12.28% in sept. 2016 and its industry average being 17.64%. This drop in ROE could be attributed to a few things. It could be due to the selling off of their Defense Security division; This would undermine some equity to shareholders for the time being as a division has been sold off, but this is also good for the long term as the company is narrowing in on the niche market it is trying to capture. Also, the company makes share repurchases of about $1,260,276 which puts some equity back into the hands of shareholders, so this is something to bare in mind. Growth I would be hard pressed to say that IRbot could not be considered aShow MoreRelatedTheories on Financial Analysis6426 Words   |  26 PagesDodd (professor of finance at Columbia). The first edition was 1934, about the worst period in the financial history of America. Despite being in the middle of the Great Depression, their analysis and recommendations were professional and hard boiled. They distinguished investment from speculation, but considered most investments in common stock as speculative. The focus of financial analysis has changed substantially since then, but a historical foundation in financial analysis requires quite aRead MoreCompany Valuation Methods. the Most Common Errors in Valuations13584 Words   |  55 Pagesdifference in a specific company’s value may be due to a multitude of reasons. 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