NASDAQ’S NEXT BIG WINNERS - GoldmanResearch.com · 2015-08-21 · Company beat Wall Street EPS estimates and Street margin expectations, which boosted the stock’s share price

Investment and Company Research Select Research

SPECIAL REPORT

www.goldmanresearch.com Copyright © Goldman Small Cap Research, 2015 Page 1 of 12

Rob Goldman August 2015 [email protected]

NASDAQ’S NEXT BIG WINNERS

http://www.goldmanresearch.com/

mailto:[email protected]


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INTRODUCTION

The stock market has been very mixed this year and frankly the big gainers have been few and far between

since the moves have been narrow rather than broad-based. Many pros believe that there are a lot of speed

bumps ahead, with valid concerns about future interest rate increases, slowing growth and currency issues in

China, the mess in Europe, and even questions in the U.S. Moreover, many stocks are not enjoying stellar

earnings growth this year. As a result, some pros have stated that valuations are too high, and coupled with

poor technical chart data, stocks are headed for a dive.

Folks, don’t you believe it!

All of this noise is just a signal that we are in a stock picker’s market with some big winners in the making, if

you know what to look for. In fact, not only are we headed into the best part of the year seasonally, but all signs

point to 2016 as a huge year for most stocks. And, the big winners are shaping up to be small, low-priced

stocks which have underperformed so far this year.

That is where we come in. We specialize in identifying winners before the rest of Wall Street and other

investors and we have had a number of big winners this year to prove it. Skechers USA (NYSE – SKX - NR)

jumped by over 125% in just a few months while Voltari (NASDAQ – VLTC) roared over 700% in a matter of

three weeks, and there are more! (See the March 8, 2015 and April 4, 2015 editions of The Goldman Guide

for the original recommendations and profiles.)

With that in mind, we have identified 3 overlooked stocks that we think could become the next great small cap

stocks to own regardless of whether the overall market goes up, down, or stands pat.

Happy Investing!

The Goldman Small Cap Research Team


http://www.goldmanresearch.com/20150308937/The-Goldman-Guide/spring-ahead-with-these-stocks.html

http://www.goldmanresearch.com/20150406959/The-Goldman-Guide/follow-this-icon.html


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TABLE OF CONTENTS

POISED FOR MONSTER GROWTH (NYSE – MWW)………………………………………………. 4

THE BEST VALUE IN TECHNOLOGY (NASDAQ – ORBK)………………………………………… 6

HEALTH CARE STOCK GROWING PROFITS (NASDAQ – RTIX)………………………………… 8

ONE MORE THING……………………………………………………………………………………….10



SPECIAL REPORT


POISED FOR MONSTER GROWTH

Monster Worldwide Inc. (NYSE - MWW - $7.24 - NR)

52-Week Range: $7.45 - $3.41

Market Cap: $659M

Avg Daily Vol: 1,300,000

Ok, we get that MWW actually trades on the NYSE. Still, with a market cap of only $659 million, MWW

behaves far more like a NASDAQ growth stock than a stodgy NYSE company. For years a darling of Wall

Street, MWW is in the midst of a major growth spurt and given current economic trends, we believe that the

Company is about to catch lightning in a bottle, which is why we initially profiled the stock way back in June.

For the uninitiated, Monster Worldwide is a global leader in connecting people to jobs, wherever they are. For

more than 20 years, Monster has helped people improve their lives with better jobs, and employers find the

best talent. Today, the Company offers services in more than 40 countries, providing some of the broadest,

most sophisticated job seeking, career management, recruitment and talent management capabilities. Monster

continues its pioneering work of transforming the recruiting industry with advanced technology using intelligent

digital, social and mobile solutions, including the our flagship website Monster.com® and a vast array of

products and services.

The underlying catalyst

here is the trend toward

outsourcing staffing

services which has just

begun to make its mark

on the Company’s

financials. For 2Q15, the

Company beat Wall

Street EPS estimates

and Street margin

expectations, which

boosted the stock’s

share price considerably,

resulting in a new 52-

week high. Still, these

levels are a fraction of

previous historical highs

and we believe that there

is much more to come.

The strong Q2 performance prompted analysts to raise their EPS estimates for this year and next year.

Currently, the Street is looking for $0.43 in EPS this year as compared with $0.28 last year. For 2016, EPS is

Figure 1: MWW Chart (courtesy of www.StockTa.com)



SPECIAL REPORT


slated to jump by over 50% to $0.66! In the meantime, the Company has surprised on the upside four straight

quarters so investors could expect more of these events, going forward.

Interestingly, while the rest of the stock market looks terrible on a technical basis, MWW is trading well above

its key Daily Moving Averages (DMAs), which is a very bullish signal. From the valuation perspective, the stock

is incredibly cheap. At current levels, MWW trades 16.8x this year’s projected EPS and 11x next year’s EPS

estimate, despite growing earnings at a 50% average clip. We would not be surprised to see MWW end up

being a 50% winner in relative short order if the earnings growth continues on this torrid pace especially given

the high short ratio, which could prompt a short squeeze.

MWW Trading and Valuation Data

20 DMA $6.58 Above/Below 10.0% 20 DMA $123.07 Above/Below -1.5%


200 DMA $5.57 Above/Below 30.0% 200 DMA $121.37 Above/Below 0.0%

Perf YTD 56.7% RSI 67.7 Perf YTD 2.2% RSI 42.2

Insider Own % 7% Inst Own % 88% FY15E Rev (mil) $731 FY15E Rev-G -5.0%

Public Float 86M Public Float % 93% FY16E Rev (mil) $758 FY16E Rev-G 4.0%

Short Float 23M Short Float % 29% Price/Rev '15 0.9 Price/Rev '16 0.87

EPS Beat (Q's) 4 of 4 EPS Missed 0 FY15E EPS $0.43 FY15E EPS-G 54.0%

FY15E EPS Trend Up FY16E EPS Trend Up FY16E EPS $0.66 FY16E EPS-G 53.0%

Oper Margin 16.0% Net Cash/Shr N/A FY15E P/E 16.8 FY16E P/E 11.0

Insider Trends Sales Inst. Trends Sales FY15E PEG 0.3 FY16E PEG 0.2

Definitions:

DMA - Daily Moving Average

RSI - Relative Strength Index

Rev-G - Revenue growth from previous year

EPS-G - EPS growth from previous year

EPS Beat (4 Q's) - Number of times estimates beaten in last 4 quarters

EPS Trends - Direction in which Street estimates are moving

Insider Trends - Buy/Sell Trend in most recent quarter

Inst. Trends - Buy/Sell Trend in most recent quarter

Sources: GSCR, Yahoo! Finance, Finviz.com, BarChart.com

Russell 2000 Index ETF (NYSE - IWM - $121.26)Monster (NYSE - MWW - $7.24)

Recent Trends EPS Data/Valuation

Trading Data Trading Data

vs

Company Share Data Company Rev. Data/Valuation



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THE BEST VALUE IN TECHNOLOGY

Orbotech Ltd. (NASDAQ - ORBK - $18.94 - NR)

52-Week Range: $22.34 - $13.82

Market Cap: $805M

Avg Daily Vol: 271,000

Sometimes it is best to start at the end. Instead of blathering on about the Company, all you need to do is read

the last sentence in the Company’s description to see why we like this stock so much: “Virtually every

electronic device in the world is produced using Orbotech systems.”

Now for more on the Company, which by the way I have followed as an analyst and mutual fund manager for

over 20 years. ORBK is a global innovator of enabling technologies used in the manufacture of the world's

most sophisticated consumer and industrial products throughout the electronics and adjacent

industries. The Company is a leading provider of yield enhancement and production solutions for

electronics reading, writing and connecting, used by manufacturers of printed circuit boards, flat panel

displays, advanced packaging, micro-electro-mechanical systems and other electronic components.

The bottom line with ORBK

is pretty basic. Circuit

boards, flat panel displays

on mobile devices, etc. are

inspected using ORBK

automated optical

equipment and as the

inspected products get

smaller and smaller and

are produced with more

and more layers, ORBK’s

customers have to buy

more or new equipment.

So, ORBK is essentially a

play on the growth of all

new electronic device

production.

Figure 2: ORBK Chart (courtesy of www.StockTA.com



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The kicker is that the valuation is a joke. Right now, the Street is forecasting ORBK will earn $1.99 in EPS

in 2015 versus $0.83 last year. That is more than a double! Next year, on modest revenue growth, EPS

is slated to be $2.27. Yet, the current P/E is around 9x for this year and roughly 8x for 2016. Historically,

the stock trades at least 14-15x forward 12-month EPS. If ORBK earns $1.99 in 2015, and the stock

trades 15x that figure as opposed to the $2.27 for next year, it is a $30 stock, which is more than a 50%

gain from here.

Before dropping in sympathy with stocks that have exposure to Asia (notably China), it reached a 52 week

high of $22.34. We think it is well on its way to bust through that figure on the way to $30 in the coming

months. The DMAs are favorable, and there is a ton of long-standing institutional ownership.

.

ORBK Trading and Valuation Data


50 DMA $19.93 Above/Below -5.0% 50 DMA $124.57 Above/Below -2.7%



Insider Own % 12% Inst Own % 54% FY15E Rev (mil) $748 FY15E Rev-G 28.3%

Public Float 37.2M Public Float % 88% FY16E Rev (mil) $805 FY16E Rev-G 7.7%

Short Float N/A Short Float % N/A Price/Rev '15 1.1 Price/Rev '16 1

EPS Beat (Q's) 2 of 4 EPS Missed First 2 FY15E EPS $1.99 FY15E EPS-G 140.0%

FY15E EPS Trend Down FY16E EPS Trend Down FY16E EPS $2.27 FY16E EPS-G 14.1%


Insider Trends Unch Inst. Trends Unch FY15E PEG 0.1 FY16E PEG 0.6

Definitions:










Russell 2000 Index ETF (NYSE - IWM - $121.26)Orbotech (NASDAQ - ORBK - $18.94)



vs




SPECIAL REPORT


HEALTH CARE STOCK GROWING PROFITS

RTI Surgical (NASDAQ - RTIX - $6.67 - NR)

52-Week Range: $7.48 - $3.50

Market Cap: $383M

Avg Daily Vol: 299,000

While not as obvious a valuation play as MWW and ORBK, RTIX is in the important health care sector and is

growing profits at a torrid pace. RTIX is a leading global surgical implant company providing surgeons with

safe biologic, metal and synthetic implants. Committed to delivering a higher standard, RTI’s implants are

used in sports medicine, general surgery, spine, orthopedic, trauma and cardiothoracic procedures and

are distributed in nearly 50 countries. RTIX is headquartered in Alachua, Fla., and has four manufacturing

facilities throughout the U.S. and Europe.

There is a lot to like about RTIX, which includes the multi-billion dollar market in which it plays, particularly

in the U.S. where the sports medicine practices are growing like a weed. Interestingly, as evidenced in its

most recent quarter, the business is well diversified by vertical (treatment) market and by geography,

given its solid growth abroad. What cannot be overlooked is its unusual earnings growth achieved through

even modest sales growth. It shows that once the sales levels reach the break-even level in terms of

expenses, which are low compared to peers, the profits just flow right down to the bottom line.

The proof is in the

pudding. EPS are

forecast to jump from

$0.11 in 2014 to $0.21

this year and $0.27 next

year. By the way, the

projections for this year

and next are probably a

bit low because in the

past four quarters, RTIX

has exceeded forecasts

to the tune of a total of

$0.05 which is key at

these levels of EPS.

Figure 3: RTIX Chart (courtesy of www.StockTA.com)



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Right now the stock trades 32x and 24x 2015 and 2016 EPS, respectively. On the surface that may not

seem like a bargain but it is actually on the light side, especially considering its high EPS growth rate.

When you compare the RTIX PEG ratio (PE/Growth Rate) to the industry, you will see it is actually at a

discount since it is under 1.0x. Moreover, we think that RTIX could continue to beat Street projections,

which only adds to our valuation/growth thesis. Our gut tells us RTIX could earn $0.30 next year

prompting it to peak around $9, which is a 34% rise from current levels.

RITX Trading and Valuation Data


50 DMA $6.61 Above/Below -0.9% 50 DMA $124.57 Above/Below -2.7%



Insider Own % 10% Inst Own % 65% FY15E Rev (mil) $285 FY15E Rev-G 8.4%

Public Float 48.4M Public Float % 90% FY16E Rev (mil) $304 FY16E Rev-G 7.0%

Short Float 1.7M Short Float % 4% Price/Rev '15 1.3 Price/Rev '16 1.3

EPS Beat (Q's) 4 of 4 EPS Missed 0 FY15E EPS $0.21 FY15E EPS-G 91.0%

FY15E EPS Trend Unch FY16E EPS Trend Down FY16E EPS $0.27 FY16E EPS-G 29.0%


Insider Trends Sales Inst. Trends Unch FY15E PEG 0.3 FY16E PEG 0.9

Definitions:










Russell 2000 Index ETF (NYSE - IWM - $121.26)RTI Surgical (NASDAQ - RITX - $6.67)



vs




SPECIAL REPORT


ONE MORE THING…

Investing in stocks and especially in small caps is not without risk. However, one can mitigate that risk

somewhat by buying shares of companies trading at reasonable or low valuations relative to their growth rates,

such as the three profiled in this special report. In addition to the qualitative nature of our descriptions, no

profile would even be close to complete without some data attached to it. That’s why a GSCR-generated data

sheet along with a recent chart, is found adjacent to each stock profile. By learning about a company’s

business, positioning, trading activity and history, and key data, one can make an informed decision.

Like our approach and want to receive our top small cap trading ideas directly in your inbox each month?

We strongly encourage you to visit our premium monthly newsletter, The 30-30 Report, where we select 3

stocks we believe could rise 30% in 30 days. Since the publication’s inception in May 2012, our top 5 picks

have reached an average peak performance of 495%!

We encourage you to see our background and experience as well as the associated disclosures and

disclaimers found at the back of this special report.

Thank you for your interest. Feel free to contact us anytime.

The Goldman Small Cap Research Team


http://www.goldmanresearch.com/the-30-30-report.html


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Senior Analyst: Robert Goldman

Rob Goldman founded Goldman Small Cap Research in 2009 and has over 20 years of investment and

company research experience as a senior research analyst and as a portfolio and mutual fund manager.

During his tenure as a sell side analyst, Rob was a senior member of Piper Jaffray's Technology and

Communications teams. Prior to joining Piper, Rob led Josephthal & Co.'s Washington-based Emerging

Growth Research Group. In addition to his sell-side experience Rob served as Chief Investment Officer of a

boutique investment management firm and Blue and White Investment Management, where he managed

Small Cap Growth portfolios and The Blue and White Fund.

ANALYST CERTIFICATION

I, Robert Goldman, hereby certify that the view expressed in this research report accurately reflect my personal views about the subject securities and issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the recommendations or views expressed in this research report.

DISCLAIMER

This Select Research report was prepared for informational purposes only.

Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research and Goldman Opportunity Research. The Select format reflects the Firm’s internally generated stock ideas along with economic and stock market outlooks. Opportunity Research reports, updates and Microcap Hot Topics articles reflect sponsored (paid) research but can also include non-sponsored micro-cap research ideas that typically carry greater risks than those stocks covered in the Select Research category. It is important to note that while we may track performance separately, we utilize many of the same coverage criteria in determining coverage of all stocks in both research formats. Research reports on profiled stocks in the Opportunity Research format typically have a higher risk profile, and may offer greater upside. All information contained in this report was provided by the Company via filings, press releases or its website, or through our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations.

Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.

The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research report or note is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed.



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This report does not take into account the investment objectives, financial situation, or particular needs of any particular person. This report does not provide all information material to an investor’s decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with FINRA, the U.S. Securities and Exchange Commission or with any state securities regulatory authority.

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NASDAQ’S NEXT BIG WINNERS - GoldmanResearch.com · 2015-08-21 · Company beat Wall Street EPS estimates and Street margin expectations, which boosted the stock’s share price