January 14

2 Small Cap Stocks with 5 years of Steady Revenue Growth

Now and then, I like to run various filters to see if I can find any small cap stocks that are worth examining. In this article, I take a closer look on 2 Tech stocks which have been showing steady revenue growth over the last 5 years.

1.      Excelpoint Technology Ltd (SGX: BDF)

First up, we have Excelpoint Technology Ltd. And no, this firm does not sell anything related to the Microsoft Excel.

In fact, it is an integrated engineering firm which provides electronic components, engineering design services and supply chain management to other manufacturing companies in the Asia Pacific region.

With ‘just’ a market capitalization of S$45.9 million, it has delivered revenue of around S$1.3 billion in 2016. The bulk of its revenue (approximately 59.4%) is derived from China.

And now, here is the charm.

Over the past 3+ years, its total revenue has achieved an annual growth of over 15% annually, increasing from S$715 million in 2012 to S$1.3 billion in year 2016. This steady growth in revenue marks a constant increase in demand for its products or services.

Net profits have also risen in tandem except for the dip in FY2015 compared to FY2014. This is because FY2014’s profits have been propped up from a one-time gain on disposal of property.

That said, a big danger sign shows up in the cash flow statement. Apparently, the firm has been bleeding cash flow for the past 5 years as well. Henceforth, there may be an issue with sustaining its high dividend payout as they have been relying on the loans to pay out dividends.

On a positive note, the company has obtained the distributorship of Xilinx’s products in India last November 2016 and allow the company to expand their footprints in the region. Besides that, their R&D team has also developed new products like wireless audio and headsets have been developed, offering them ample room for growth .

Excelpoint Technology Ltd last closed at S$0.39 and trades at 4.96 times P/E ratio. It also offers a dividend yield of 6.18%.

2.      Fischer Tech Ltd (SGX: BDV)

blankNext up is Fischer Tech Ltd. The company manufactures and sells precision engineering plastic components for electronic products. It is also involved in the design and manufacturing of making plastic injection moulds. Their businesses are based in Singapore, Malaysia, Thailand and China.

Since year 2013, their revenue has experienced a consistent growth of approximately 10% annually from S$133 million in 2013 to S$185 million in 2016.

To top it off, their retained earnings pool has been on an upward trajectory – going from 17% to 26%. It currently stands at S$45 million, more than half of its market capitalization of S$79.4 million.

In addition, their dividends per share have been relatively consistent over the past 3 years. It is well supported by their positive operating cash-flow since year 2013, and we believe that investors are likely to receive handsome dividends, at least in the near term.

Fisher Tech Ltd last closed at S$1.43 and trades at 6.3 times P/E ratio. It also offers a dividend yield of 4.18%.

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