Once investors see their powerful earnings growth they will flock to these three stocks, so buy shares now before they report earnings and watch their stock prices jump.
Stocks hit a new low last week before rallying at week's end on the strength of oil prices and the belief (in some circles) that equities are now oversold and primed for big moves ahead. I am not prepared to make such a pronouncement, however, I strongly believe that stock valuations will now be impacted by earnings growth prospects for 2016, rather than macroeconomic issues. With that in mind, it is time to turn your attention to stocks trading below their earnings growth rates that have a history of beating earnings per share (EPS) estimates.
BMC Stock Holdings, Inc. (NASDAQ: STCK)
BMC Stock Holdings is one of the nation's leading providers of diversified building products and services to professional builders and contractors in the residential housing market. The company's product and service offerings span building materials, including millwork and structural component manufacturing capabilities, along with consultative services. BMC Stock Holdings has enjoyed meaningful top-line and bottom-line growth due to the fact that the company almost exclusively serves markets in the fast-growing South and West regions.
The company is projected to grow EPS in 2016 by 32% to $0.94, as compared to $0.71 in 2015. Moreover, although the first quarter of the year is typically a difficult one, as evidenced by the loss per share of $0.01 last year, Wall Street projects positive earnings per share of $0.07 for Q1 2016. At current levels, the stock trades around 15x its estimated 2016 EPS. My target price of $18 reflects a reasonable 19x multiple and is substantially below the estimated EPS growth rate for this year.
CEVA Inc. (NASDAQ: CEVA)
CEVA is what is known in technology circles as a fabless semiconductor company as it does not really produce any hardware. However, it has a tremendous Intellectual Property (IP) team that designs some of the most important applications used by semiconductor companies in their production of digital signal processors, especially in the mobile device market. In fact, the company is the leading licensor of signal processing IP and offers the most widely used IPs for Bluetooth applications.
