Growth investors prefer to invest in micro-cap companies that can double their investments in a shorter time relative to the steady growth from large-cap stocks. Though micro-cap companies can make huge upside and downside movements in the span of few hours, financially stable and well-managed companies could be a hedge against headwinds – these companies have the potential to generate low-risk returns.
Investors set different criteria’s for their stock selection to outperform the market returns, the focus of their stock-picking revolves around sales growth, market competition, and the strong business model.
Superior Uniform Group (NASDAQ: SGC) is among those micro-cap companies that have the potential to generate substantial returns for investors. SGC stock price soared more than 65% in the last twelve months, driven by strong financial numbers and healthy balance sheet.
It is engaged in designing, manufacturing, and distribution of uniforms to foodservice chains, major domestic retailers, transportation and other service industries.
The company has topped revenue and earnings expectations for the latest quarter, and its financials increased at a double-digit rate over the previous year quarter. Its EBIT increased 24% in Q4 over the past year period. Moreover, Superior Uniform expects to extend the momentum this year – which would facilitate its share price.
LGI Home (NASDAQ: LGIH) is among those small-cap stocks that had doubled their share price last year, supported by substantial growth in revenue and earnings. The company posted net revenue growth of 51% in fiscal 2016 from last year, driven by home sales revenues growth of 50.1% to $1.3 billion and the average 6.9% rise in home sales price. Robust revenue growth allowed it to post earnings growth of 45% in the fourth quarter of FY2017.
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Furthermore, LGI expects to generate a high double-digit sales growth in FY2018, while the company anticipates its earnings per share to land in the range of $7 per share, relative to earnings of $5.24 per share. Overall, both companies appear financially sound, and their future fundamentals are strong considering their guidance.
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