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With all of the recent turmoil in the financial sector, most finance companies know they have to be on their toes, especially those at the small cap level where there tends to be additional risk. These companies have a lot to prove, and one way a company demonstrates they have a sound infrastructure is by keeping debt manageable. This is especially critical for companies during times of growth. When a company borrows too heavily upon its assets, the debt can overshadow growth enhancing tactics. Today we gathered a list of small cap financial companies that have minimal long-term debt. In addition, they all have EPS growth rates above 25% for the next year. We think you will find our list quite interesting.
The Debt/Equity Ratio illustrates how aggressively a company is financing its growth via debt. The more debt financing that is used in a capital structure, the more volatile earnings can become due to the additional interest expense. Should a company's potentially enhanced earnings fail to exceed the cost associated with debt financing over time, this can lead the company toward substantial trouble.
The Long-Term Debt/Equity Ratio is a variation of the traditional debt-to-equity ratio; this value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. The 1-Year Expected EPS Growth Rate is an annual growth estimate, where the growth projections are made by analysts, the company or other credible sources.
We first looked for small cap financial stocks. Next, we screened for businesses that have maintained a sound capital structure (D/E Ratio<0.1). We then screened for businesses that operate with little to no long-term debt (Long-Term D/E Ratio<0.1). We then looked for businesses with projected high growth, measured by 1-year projected EPS growth above 25%.
Do you think these small-cap stocks have what it takes to grow? Use our list to help with your own analysis.
1) Investment Technology Group Inc. (ITG)
| Sector | Financial |
| Industry | Investment Brokerage - Regional |
| Market Cap | $322.39M |
| Beta | 1.11 |
Key Metrics
| Debt/Equity Ratio | 0.07 |
| Long-Term Debt/Equity Ratio | 0.05 |
| 1-Year Projected Earnings Per Share Growth Rate | 80.00% |
| Short Interest | 6.42% |
Investment Technology Group, Inc. operates as an independent research and execution broker in the United States, Canada, Europe, and the Asia Pacific region. It provides trade execution, trade order management, and network connectivity, as well as investment research services and solutions for portfolio management, pre-trade analytics, and post-trade analytics and processing. The company's market intelligence solutions include investment research; and market research services to corporate clients within the healthcare and telecom industries.
Its liquidity management solutions comprise ITG Algorithms and ITG Smart Router that offer a way to trade orders. The company also offers POSIT suite, which provides anonymous matching of non-displayed equity orders; and ITG Commission Manager, an automated web-based commission management portal. In addition, it provides various platforms include Execution Management System, which provides multi-asset trading opportunities; Order Management System (OMS) that combines portfolio management, compliance functionality, trading, post-trade processing, and a financial services communications network; ITG Net, a financial communications network that provides connectivity between buy-side and sell-side firms for order routing and indication of interest messages; and ITG Single Ticket Clearing, a broker-neutral operational service.
Further, the company provides ITG Trading Analytics, which improves execution performance before the trade happens (pre-trade) and during trading (real-time) by providing reliable portfolio analytics and risk models; and ITG Portfolio Analytics that assists asset managers with portfolio decision-making tasks from portfolio construction and optimization. Additionally, it offers institutional broker-dealer services; and pre-and post-trade analysis, fair value, and trade optimization services. The company was founded in 1983 and is headquartered in New York, New York.
2) Meridian Interstate Bancorp, Inc. (EBSB)
| Sector | Financial |
| Industry | Savings & Loans |
| Market Cap | $331.20M |
| Beta | 0.63 |
Key Metrics
| Debt/Equity Ratio | 0.04 |
| Long-Term Debt/Equity Ratio | 0.00 |
| 1-Year Projected Earnings Per Share Growth Rate | 37.14% |
| Short Interest | 2.76% |
Meridian Interstate Bancorp, Inc. operates as a holding company for East Boston Savings Bank that provides various financial services to consumers and businesses in Massachusetts. The company offers various deposit instruments, including non-interest-bearing demand deposits comprising checking accounts; interest-bearing demand accounts, such as NOW and money market accounts; savings accounts; and certificates of deposit, as well as commercial checking accounts.
It also provides various loan products, which include commercial real estate loans, one to four family residential loans, multi-family real estate loans, construction loans, commercial business loans, home equity lines of credit, and consumer loans, as well as involved in the purchase and sale of loan participation interests.
In addition, the company offers non-deposit products consisting of mutual funds, annuities, stocks, and bonds through a third party broker-dealer; and long-term care insurance through a third-party insurance company. As of July 24, 2012, it operated 24 full service locations in the greater Boston metropolitan. The company was founded in 1848 and is based in East Boston, Massachusetts. Meridian Interstate Bancorp, Inc. is a subsidiary of Meridian Financial Services, Incorporated.
3) Amerisafe, Inc. (AMSF)
| Sector | Financial |
| Industry | Property & Casualty Insurance |
| Market Cap | $459.84M |
| Beta | 0.60 |
Key Metrics
| Debt/Equity Ratio | 0.04 |
| Long-Term Debt/Equity Ratio | 0.04 |
| 1-Year Projected Earnings Per Share Growth Rate | 31.43% |
| Short Interest | 2.43% |
AMERISAFE, Inc., an insurance holding company, markets and underwrites workers' compensation and general liability insurance for small to mid-sized employers engaged in construction, trucking, agriculture, oil and gas, logging, maritime, and sawmills industries. Its workers' compensation insurance policies offer various benefits to injured employees for temporary or permanent disability, death, and medical and hospital expenses. The company markets its products through its insurance agency subsidiary and independent agencies in the southeast United States. AMERISAFE, Inc. was incorporated in 1985 and is based in DeRidder, Louisiana.
4) Interactive Brokers Group, Inc. (IBKR)
| Sector | Financial |
| Industry | Investment Brokerage - National |
| Market Cap | $625.81M |
| Beta | 0.78 |
Key Metrics
| Debt/Equity Ratio | 0.02 |
| Long-Term Debt/Equity Ratio | 0.00 |
| 1-Year Projected Earnings Per Share Growth Rate | 39.36% |
| Short Interest | 2.70% |
Interactive Brokers Group, Inc. operates as an automated electronic broker and market maker. It engages in routing orders; and executing and processing trades in securities, futures, foreign exchange instruments, bonds, and mutual funds on approximately 100 electronic exchanges and trading venues worldwide. The company also provides bid and offer quotations on approximately 867,000 securities and futures products listed on electronic exchanges. Interactive Brokers Group, Inc. offers its services primarily to institutional and individual customers with approximately 189,000 cleared customer accounts. The company was founded in 1977 and is headquartered in Greenwich, Connecticut.
5) MarketAxess Holdings Inc. (MKTX)
| Sector | Financial |
| Industry | Investment Brokerage - National |
| Market Cap | $1.21B |
| Beta | 0.96 |
Key Metrics
| Debt/Equity Ratio | 0.00 |
| Long-Term Debt/Equity Ratio | 0.00 |
| 1-Year Projected Earnings Per Share Growth Rate | 25.19% |
| Short Interest | 3.89% |
MarketAxess Holdings Inc., through its subsidiaries, operates an electronic trading platform that allows investment industry professionals to trade corporate bonds and other types of fixed-income instruments. The company's trading platform allows institutional investor clients to request competitive, executable bids, or offers from multiple broker-dealers simultaneously, as well as to execute trades with the broker-dealer of their choice.
It provides its clients the ability to trade the U.S. high-grade corporate bonds, European high-grade corporate bonds, and emerging markets bonds, including investment-grade and non-investment grade debt, as well as crossover and high-yield bonds, agency bonds, asset-backed and preferred securities, and credit default swaps. The company offers its trading platform services to approximately 850 active institutional investors, including investment advisers, mutual funds, insurance companies, public and private pension funds, bank portfolios, broker-dealers, and hedge funds.
It also provides Corporate BondTicker service, which offers fixed-income market data, analytics, and compliance tools that help its clients to make trading decisions; and Financial Information eXchange message management tools, connectivity solutions, and ancillary technology services that facilitate the electronic communication of order information between trading counterparties. MarketAxess Holdings Inc. was founded in 2000 and is headquartered in New York, New York.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/31/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: This article was prepared for ZetaKap Media by one of our full-time analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.
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