In a market that’s already gone up, many of the top micro-cap stocks are expensively priced as institutional investors continue to buy double-digit growth where it can be found.
I suspect these richly valued companies will stay this way going into 2016, because there just isn’t a lot of genuine business growth to be found in this slow-growth world.
Naturally, micro-cap companies are inherently more risky and typically more volatile on the stock market. But this is a market, I believe, for existing winners, and price momentum isn’t likely to disappear among those stocks whose underlying businesses are beating consensus.
Also Read: Best Micro-Cap Stocks for the Savvy Trader
Two Top Micro-Cap Stocks Currently Beating the Street
Fortinet Inc. (NASDAQ/FTNT)
One interesting technology company that’s very close to jumping to the next level of market capitalization is Fortinet Inc., out of Sunnyvale, CA.
Double-digit growth is a tough thing to come across in the current environment. But it’s available with cybersecurity stocks! Naturally, these positions are fully valued; but that doesn’t mean a stock like Fortinet won’t keep ticking higher.
Up close to 100% over the last 12 months, Fortinet sells anti-malware, firewall, and anti-spam technology. This is a top-line growth story as management continues to pour resources into new business development. Earnings are still modest with this firm.
But Fortinet is a patent powerhouse and is constantly innovating. Its 2015 first quarter sales grew 26% to $213 million, with a 36% year-over-year improvement in quarterly billings.
GAAP earnings were modest at $1.6 million, compared to $8.4 million in the first quarter of 2014.
Fortinet finished the first quarter with just over $1.0 billion in cash and equivalents with no material debt. The stock just got another Wall Street upgrade. I believe this stock has price momentum for this year.
Also Read: Top 5 Micro-Cap Stocks to Watch in 2015
Globus Medical, Inc. (NYSE/GMED)
Another micro-cap company with solid potential for above-average growth this year is Globus Medical, Inc. Healthcare-related holdings are always welcome in an equity market portfolio. This stock is not overly priced but offers good growth prospects this year and next.
Another debt-free micro-cap, Globus Medical is based in Audubon, PA, manufacturing spinal implants. The company was founded in 2003, only trading on the stock market for just over two years with a decent track record of wealth creation.
Not quite as fast-growing as Fortinet, Globus Medical’s first-quarter revenues improved 15% comparatively to $132 million. This enterprise has proven so far to be a fairly consistent grower. Its 2014 total sales grew nine percent to $474 million.
There are more earnings to be had with this company. The first quarter of 2015 saw its bottom line produce $24.6 million in profits, up from $21.1 million comparatively.
Globus Medical finished the first quarter with $285 million in cash and securities, debt-free as mentioned and with a growing following among Wall Street analysts.
In any market, even one that’s already gone up tremendously, there are always growth businesses. (See “Stock Market Crash 2015: Will the Fed Kill the Bull Market?”)
A material price correction in the broader market would make these micro-cap stars even more attractive.