Strong Growth Fueling Rallies In These 4 Stocks
Blowing away earnings estimates these four stocks can add some much-needed growth to your portfolio. With years of growth still ahead, these stocks are great buys right now while they’re still undervalued.
After a couple of months of rallying after the deep and early losses to begin 2016, the recent rise in the market has begun to stall. Investors have begun to factor in first quarter earnings which were nothing to write home about this year. Year-over-year profits fell within the S&P 500 at their fastest pace since 2009. First quarter GDP growth was barely above zero this year at .5% and the ADP April Jobs Report provided its punkest reading in a year.
However, some companies, particularly in the small cap part of the market, have managed to produce more than solid results despite a horrid global demand picture and anemic domestic economic growth to begin the year. Today, we are going to look at some of the names that have been positively profiled on these pages before that have delivered the goods this quarter and still look undervalued.
Let’s start with a couple of construction plays which are in the Small Cap Gems portfolio,Tutor Perini (NYSE: TPC) and LGI Homes (NASDAQ: LGIH).
Both are bets that the housing market will continue to recover from its post-crisis lows. 2015 produced the highest level of housing starts since 2007, and this sector of the economy continues to move ahead in a two steps forward, one step back fashion.

Last week, Tutor Perini, which consistently disappointed with some key project cost overruns in 2015, posted up some of the best quarterly results this construction giant has provided shareholders in several years. Earnings came in at 31 cents a share, triple last year’s net and 12 cents a share above the consensus estimate. Earnings from its construction operations doubled from the same period a year ago. The company posted is strongest first quarter cash flow figures in eight years and its backlog, which already was impressive for a company with less than a $1 billion market capitalization, grew to $8.2 billion from $7.5 billion a year ago. Even with the big rally on Thursday after its earnings results, the stock is a good value at $19 a share given it should make $1.90 to $2.20 a share in earnings this year and its operations are obviously improving.
Small Texas-based homebuilder LGI Homes once again beat the bottom line consensus which it has done for five straight quarters now. Revenues were up more than 60% year-over-year as well. The stock continues to be cheap due to concerns about the collapse of crude’s impact on growth in Texas. However, most of the company’s communities in Texas are not located in the energy hubs within the state like Houston.

More importantly, most of the company’s growth and some 50% of its national footprint is outside of the Lone Star State and located in new communities in Colorado. Earnings estimates for both FY2016 and FY2017 were already going up before the company’s latest earnings beat and LGI Homes also recently announced that April home closings were nearly 28% above the same period last year; so, expect that growth to continue. The company posted a profit of just under $2.50 a share in FY2015. LGI should make north of $3.25 a share in profits this fiscal year and the consensus has nearly $4.00 a share in the cards for FY2017. Given that growth trajectory, the shares are undervalued at roughly $28.00 a share.
My favorite little lodging real estate investment trust, Chatham Lodging Trust (NASDAQ: CLDT), continues to chug along. Quarterly earnings were in line with nearly a 17% increase in revenues as the company continues to enjoy one of the higher growth rates in the industry. Occupancy levels increased some 200 basis points to 78% and earnings and EBITDA rose in line with sales. Earlier this year the company raised its dividend 10%. It was the sixth straight year Chatham raised its payout since coming public in 2010. The shares now yield 6.2%, pay a monthly dividend, and trade for just 10 times trailing FFO (Funds from Operations).

Finally, ANI Pharmaceuticals (NASDAQ: ANIP), a small specialty drug maker I have highlighted many times over the past year, has been on a tear lately. Previously, the stock was being punished due to the overhang from Valeant Pharmaceuticals (NYSE: VRX) and the escalating rhetoric about drug price “gouging” this election year. None of which applied to its business model.

The stock is up more than 25% since management raised their full-year earnings, revenue and EBITDA forecast for 2016 on April 4th. The shares got another boost Thursday when the firm reported earnings of 76 cents a share, 12 cents above expectations while affirming its earlier guidance. Profits should post better than 30% growth this fiscal year and thanks to organic growth and small “bolt on” product acquisitions, earnings should shoot up 40% or better in FY2017. Even with the stock’s recent rally, the shares go for under 10 times next year’s earnings consensus. This is very cheap in a market totally devoid of growth at the moment.
Positions: Long ANIP, CLDT, LGIH, TPC