Small cap stocks should not be too big and therefore we limit ourselves to stocks with a freely tradable market value of up to €500 million. Unfortunately, we will not cover the very smallest companies, market value below € 100 million, with hardly any liquidity in order not to disturb the market for these shares. The main criteria on which we select the small cap stocks are valuation, hard assets, growth potential and quality of management.
Below is the top 5 best small cap stocks at the moment:
5. Atresmedia (A3M) – P/E: 9.87
Atresmedia Corporacion de Medios de Comunicacion S.A. is a media company that is right on television, radio and digital media. With Antena 3, Atresmedia has the second most popular television channel in Spain. The market is much like a duopoly, with Atresmedia and Mediaset Espana dominating the market and holding 85% market share. Television is under pressure from online competition, but the language barrier and strong in-house productions can largely protect Atresmedia from this.
Atresmedia has a market value of € 937 million and net debt of € 183 million. So this is a relatively large small cap stock, but the freely tradable market value is a lot smaller. This is because Grupo Planeta (41.7%) and UFA Film und Fernseh (18.65%) together hold 60.35% of the shares. The balance sheet is thus quite strong with a debt EBITDA ratio below 1. Like many television broadcasters, Atresmedia has a very strong free cash flow. Shareholders in Atresmedia are rewarded through a generous dividend which is 10.84% for the coming year. Investors are thus rewarded for waiting while the Spanish advertising market benefits from economic recovery.
Share price Atresmedia Small cap share
4. Heijmans (HEIJM) – P/E: 8.61
Heijmans is a Dutch builder that has had to sell its operations in Belgium and Germany to strengthen its balance sheet. The company builds infrastructure projects, but also focuses on real estate in the form of offices, stores and apartments. The Dutch construction market was difficult for a long time. In times of crisis, some projects were accepted at too low a cost and this caused financial setbacks. Heijmans suffered greatly from this and the share price sank. In 2006 the company was still worth €1 billion, but now there is only €176 million left. However, the difficult times seem to be over and there seems to be tightness again.
Heijmans small cap share price
In fact, according to experts, far too little is being built in the Netherlands to meet demand. This turnaround is good news for Heijmans. The margins are thin at 1.9%, but could rise quickly. Heijmans’ balance sheet is now also strong again with a net cash position of €30.6 million. The current price-earnings ratio is low at 8.6, but could become even lower in the future as earnings rise. Heijmans last paid a dividend in 2013. However, analysts are positive and expect a dividend of €0.47 per share for 2019. This would equate to a dividend yield of 5.7%. Heijmans itself, in its trading update, is also positive about its expectations for 2019 and sees itself benefiting primarily from the strong housing market.
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3. Caisse Regionale de Credit Agricole du Morbihan (CMO) – P/E: 8.47
Credit Agricole du Morbihan is one of the regional banks of Credit Agricole. There are several publicly traded regional banks within the Credit Agricole group. Many are attractively valued due to their interest in Credit Agricole and regional loans. Credit Agricole du Morbihan serves the Morbihan region in western France with credit and insurance services. The Morbihan region is doing relatively well economically and yet this regional bank is very cheap.
The bank has a market value of € 566 million and 26% is owned by Credit Agricole and 30% by members of local banking organizations. As a result, the stock still behaves like a true small cap stock. The bank’s book value is €1,499 million and a price to book value ratio of 0.38.