Yes, it is a play on guns just as Cabela’s is. Big 5 Sporting Goods Corporation (NASDAQ:BGFV), however, has smaller stores than Cabela’s, a traditional square footage of 11,000 square feet and a full-line product offering. The company plans to open approximately 15 new stores this year for a reasonable expansion plan.
The 58-year old company went public in 2002. Headquarterd in El Segundo, CA, almost half of its stores are in California. The stock is up 227% in the last year. That’s how small caps can roll, but it is not surprising after its growth in diluted EPS. With such high expectations, waiting until after earnings are digested would be advised.
Impenetrable moat
Screening for a company with no debt and a P/E under 20 led to a CAPS five star ranked name with a 60.6 % gross profit margin, 3.1% yield, and a 14.92 trailing P/E…The Female Health Company (NASDAQ:FHCO), world leader in female condoms with a monopoly and impenetrable moat.
Its sole product is its FC2 female condom, distributed to public health agencies around the world. This product is the only FDA-approved female condom and is cleared by the World Health Organization for purchase.
It’s headquartered in Chicago and has 144 employees with revenue per employee of $263,578. This tiny company has been shareholder friendly and is buying back stock. The company was also named one of Motley Fool’s 25 Best Companies in America for 2013.
Barriers to entry are high as it took The Female Health Company (NASDAQ:FHCO) two decades to obtain regulatory approvals and almost 18 years of losses before the company started making a profit. Public health departments can save $20 for every dollar spent on the FC2 condom, a joint Washington DC Department of Health/Johns Hopkins University study concluded.
One caveat: the company’s website cautions, “Due to the receipt and timing of large orders, the Company experiences some quarter to quarter fluctuation in unit sales.“
Go big on small caps?
Small caps are riskier and due diligence is essential. But with great risk can come great reward. These three are proven small caps with yield and competitive advantages. Navios Maritime Holdings Inc. (NYSE:NM) is the riskiest, so I like both The Female Health Company (NASDAQ:FHCO) and Big 5 Sporting Goods Corporation (NASDAQ:BGFV) better.
The article Small Caps That Promise Big Returns originally appeared on Fool.com and is written by AnnaLisa Kraft.
AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. AnnaLisa is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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