While the Sensex has been grinding for the last few weeks near the 27,000 points levels, the small cap index has slowly outperformed. These stocks tend to perform well and have the potential to rally. There are many stocks that are undervalued and have the potential to generate returns.
Here are a few small cap stocks that can make money for investors:
RSMW is a spinning and weaving mills company, formerly called Rajasthan Spinning and Weaving Mills.
This stock has a small equity of Rs 23 crores only. It declares a huge dividend of Rs 12.5 per share, which takes the dividend yield itself to 2.25%.
The company can report a full year EPS of Rs 65, which leaves the p/e at just around 6.5 times at the current price of Rs 450. Not a bad bet at the current levels. You also get a dividend if you buy the stock now.
IndiaBulls Housing is a good stock to buy on every count. For example, the dividend yield from the stock is a healthy 7 per cent. At a time when interest rates are falling, if one can get a decent dividend yield of about 7 per cent, it is always good. On the other hand the stock is not expensively priced at around 10 times, one year forward earnings. So, buying into the stock on declines makes sense. Lastly, the industry itself has been growing at around 20 per cent every year, leaving a huge potential for a company like IndiaBulls Housing. The stock is currently trading at 666 on the National Stock Exchange.
J Kumar Infraprojects
This is one of the cheaper infrastructure stocks at the moment. The stock has seen some selling pressure in the last few weeks on account of execution worries.
However, the company has a good track record. For the quarter ended June 30, 2016, J K Kumar Infraprojects reported an EPS of Rs 4.
It can easily report an EPS of Rs 16, which makes the stock inexpensive at a price of Rs 154. In fact, the p/e at the moment is less than Rs 10.
If you buy the stock now, you also get a dividend of Rs 2 per share. The stock is trading at a price to book of just over 1.
VRL Logistics had seen a sharp fall in its share price after the promoters wanted to venture into aviation. However, they have decided against the same.
VRL is a good play on the logistics business and a big beneficiaries of GST. It has planned to expand its fleet for logistics delivery.
The stock is currently trading at Rs 296 and has fallen from levels of Rs 476. In fact, VRL Logistics is trading at a 1 year forward p/e of 18 times, which is not bad considering the huge potential for growth and benefits from GST implementation.
Jain Irrigation Systems
The government plans to double farmer income in the next 5 years. We have seen a Union Budget that has heavy capital outlay towards the farming sector.
Companies like Jain Irrigation which are into Micro Irrigation Systems, Plastic Pipes & Products, Agro Processed Products, Renewable Energy solutions, Tissue Culture Plants, Financial Services and other agricultural inputs is likely to benefit.
The stock is trading at a p/e of 12 times 1 year forward earnings, which is not bad for a company that is likely to grow fast. The stock last closed at Rs 81.
This is not a small cap, but, more of a mid cap stock.
Sanghi Movers is the largest crane rental company in the country and the sixth largest in the world. The stock is another excellent play on India's booming infrastructure sector.
The stock is quoting at a p/e of just 8 times 1 year forward earnings. The price to book at around 1.5 times, makes the stock a good long term bet.
Apart from valuation, we see the huge spends on roads and infrastructure driving the profitability if Sanghi Movers.
The shares ended at Rs 240 on the NSE.
This is another stock that looks undervalued at the current levels of Rs 344. Sasken Communications provides services and solutions in 3G wireless and broadband DSL technologies, Internet gateways, signal processing, and IC design. The stock is quoting at a p/e of just 4 times, which makes it very attractive at the current levels.
Not a bad stock to buy at highly undervalued levels.
J B Chemicals
J B Chemicals is an established and old pharma company. It is a major player in the Gastro, Cardiac and Pain management areas. It has a Femident division focusing on Dental and Gynaec segments.
The company has been aggressively marketing its products and constantly innovating. We believe that the company has immense growth potential in the future. The stock closed at Rs 312 on the NSE.
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