Best Small Cap Stocks To Buy In 2017

Ambika Cottons

Ambika Cotton Mills is a Coimbatore based company that is largely engaged in the manufacture of premium quality Compact and Elitwist cotton yarn for hosiery and weaving. The company derives a bulk of its revenues from the export business. In fact, 60 per cent of its revenues comes from the export arena. The company is the number one in the shirting segment and is the preferred client of all top quality shirt manufacturers around the world.

 

Some favourabe parameters

You would rarely find listed companies that have a small equity capital like Ambika Cotton. In fact, the company has an equity capital of just Rs 5.88 crores. This means a small jump in net profits, can lift the EPS a great deal. The debt on the company's books is also very low. For the period ending Sept 30, 2016, the company had a small interest outgo of just about Rs 1 crores. All these make a case for investment in the stock.

Fundamentals

Coming to fundamentals, the stock is not very expensively priced. For example, the stock is trading at a p/e of just 10 times trailing EPS. The company also has a solid book value of Rs 570. This means the price to book at the current market price of Rs 1050, is just about 1.82. The one thing that we need to mention here is that the stock has run up sharply in the last few trading sessions. What this means is that you are buying the stock at a high price. So, you could probably wait and adopt a buy on dips strategy for the stock.

Check stock quote of Ambika Cotton

Century Enka

This is another stock that is very much under priced. The products manufactured by Century Enka include polyester filament yarn, nylon filament yarn, Polyester POY, etc. The story of Century Enka is not very different to that of Ambika Cotton. The company has a very small equity capital, very low debt and has a strong track record of paying dividends. It is also a part of the B K Birla group.

Fundamentally strong

The company has been consistently reporting good profits for the last many years now. For example, Century Enka reported a net profit of Rs 19 crores on a small equity capital of Rs 21 crores. The EPS for the period translated into Rs 8.70. If you annualize the same we get an EPS of Rs 34, which means the stock is trading at a p/e of just 8 times at Rs 274. The price to book is also just about 0.8 times, which makes the stock a good pick. You also get a dividend yield of 2.5 per cent, as the company last year declared a dividend of 75 per cent.

GIC Housing Finance

If you are betting on the housing finance sector, you should not be missing on the stock of GIC Housing Finance. To begin with take a look at the boost being provided by the government to the housing sector. On new year's eve Prime Minister Narendra Modi announced a huge interest subvention scheme for the sector. Apart from this, the industry itself is growing at the rate of 20 per cent per annum. This is one industry that has further potential to grow, given the huge under penetration of the housing sector in India.

Fundamentally a good bet

Shares of GIC Housing are currently trading at a p/e of just about 8 times, one year forward earnings. Hence, if you are a long term investor, it would be a good idea to buy into the share. The stock is currently trading at Rs 269.

Disclaimer

The article is not a solicitation to buy, sell in securities or other financial instruments. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article. The author and his family do not own any shares in the above mentioned stocks.