In the wake of President Obama's pep talk last night, the bulls are pouring back into the familiar large cap names. Yet, traders looking for something with a little more punch may want to move down the company size scale and look at small cap stocks ZBB Energy Corporation (AMEX:ZBB), Crown Crafts, Inc. (NASDAQ:CRWS), and Proto Labs Inc. (NYSE:PRLB). These three names may well be the market's best kept bullish secrets (for the time being anyway).
Crown Crafts, Inc. shares had nothing less than a miserable second half of last year, falling from a peak of $6.60 to a low of $4.86 by December. This year, however, has been a much more fruitful one from CRWS, with shares bouncing back to $5.34. If today's news and price action from the stock is any indication, however, the party's just getting started.
The catalyst was earnings, released this morning. In simplest terms, they were solid. That's not the big deal for CRWS though. No, the big deal is just how consistently - even if not explosively - this small cap company can turn a profit. Though fiscal 2012's top line of $85 million was a tad less than 2011's $90 million, net income grew from $4.4 million to $5.0 million [today's earnings news is not reflected in those annual numbers, though fiscal Q1 of 2013 was still a strong quarter]. It's impressive simply because most small caps of this size are not only not consistently profitable, but they're never profitable. Not only has Crown Crafts defied the odds, it's done so by acting and performing like a large cap. The trailing P/E of 10.2 and the dividend yield of 5.9% is unheard of from a company with growth prospects like Crown's making this one the small cap bargain of the day.
Proto Labs Inc. is at the other end of the spectrum - not a value idea, but a growth idea. But, like Crown Crafts, Inc., PRLB is in the unusual situation of not only being a small cap with strong (or even measurable) sales growth, but it also drives that sales growth profitably. 2009's sales of $43.8 million and profit of $4.2 million became $98.9 million and $17.9 million, respectively, and 2012 is shaping up to be just as impressive on the growth front.
In fact, the next round of catalytic news for PRLB is being discussed right now, as this is being published. The company is holding its conference call for last quarter on Wednesday morning, though we already know it's a record-breaker... again. What's the secret to Proto Labs' success? It makes injection molded parts, taking advantage of the 3D printing craze that has been rolling for a while, but has only recently caught investors' attention. It's not a cheap stock, but with income growth above 20%, the premium price for the stock is deserved.
Last but not least, ZBB Energy Corporation has been working on a recovery for quite some time, but it wasn't until yesterday that the chart really sealed the deal. How's that? Not only did ZBB put some distance between itself and the recently-hurdled 200-day moving average line, but it did so on huge volume, moving to new multi-month highs in the process. The market has spoken.
ZBB makes 'energy storage solutions', which is a two-dollar word for batteries. These aren't the Duracell AA's you can find in the checkout lane at Wal-Mart - these are high-level, high-functioning pieces of equipment used by utility companies, plants, and institution that always need power for their equipment.
As was the case with Proto Labs Inc. and Crown Crafts, Inc., ZBB Energy Corporation is growing the top line, from $1.1 million in 2009 to last year's $4.8 million. Unlike CRWS and PRLB though, ZBB isn't growing the bottom line. In fact, the loss is getting bigger. But, with only a few million in sales per year (for the time being), the loss is going to grow until the point where an economy of scale is reached and the fiscal math makes sense. In the meantime though, the chart says traders are ready to reward the company based on its progress and potential. Sometimes, that's good enough.