Last week, we discussed how there were small-cap stocks proving mighty Goldman Sachs (NYSE: GS) wrong in its report that the bull market was over for those equities. For a company mentioned in that piece, Quadrant 4 Systems (NASDAQ: QFOR), its recent results have more than demonstrated that the bull market for that equity is far from over.
The stock price from Quadrant 4 Systems has soared to an all-time high.
Another analyst report contradicts with what Goldman Sachs is advising, based on the increasing business for Quadrant 4 Systems.
It is very bullish on Quadrant 4 Systems. Now trading around $0.50 per share, it sees the stock price hitting $7.00. To support that rise, it projects a tripling in revenue by 2015. Over that same period, it sees earnings before interest, taxes, depreciation, and amortization (“EBITDA”) soaring by more than 600%.
Quadrant 4 Systems Has Revenue Growth
Based on the revenue growth for Quadrant 4 Systems, that is not overly optimistic.
For the last two quarters, Quadrant 4 Systems has reported record revenue growth. That accounts for a great deal of the share price rise. At present, quarterly revenue growth for Quadrant 4 Systems is 40%, according to Yahoo! Finance. Based on that, revenue will double in a short period of time.
Also bullish about the revenues for Quadrant 4 Systems is that the annual amount is almost equal to the market capitalization of the company. That is an indicator that the stock is undervalued. This is shown in that revenues per share are $0.59 and the share price is 20% lower.
With over 150 clients and operations in several countries, that is certainly plausible for Quadrant 4 Systems.
Quadrant 4 Has a Diversified Customer Base
It operates in the healthcare, retail, and manufacturing groups among others. It is a sector leader in SMAC (social, mobile, analytic, cloud) processes. What also sets it apart is its “live in five” guarantee to have certain solutions for clients customized and working within five days. The client list ranges from small enterprises to Fortune 100 corporations.
What investors should also like, in addition to the client list, is the ownership structure of Quadrant 4 Systems.
Almost one-third of the publicly-traded shares are owned by insiders. That is the ultimate vote of confidence in a stock. Shareholders should derive great confidence in that the high level management of Quadrant 4 Systems has a significant stake in the performance of the stock.
For a small-cap company, there is a surprisingly high level of institutional ownership of the stock of Quadrant 4 Systems. It is very rare for institutional investors to stake out any such position in a company the size of Quadrant 4 Systems. As the share price is up nearly 300% for the last 52 weeks according to Yahoo! Finance, those owning the stock of Quadrant 4 Systems have been handsomely rewarded.
Conclusion
Is Goldman Sachs a great company?
You bet . . . but it cannot be right about every stock. The performance of Quadrant 4 Systems is proving Goldman Sachs wrong in that the bull market is not over for every publicly-traded small-cap company. That is what makes Quadrant 4 Systems right for the portfolio of those looking for a small-cap stock that has been registering record revenue growth.
What are your thoughts about micro-cap stocks like Quadrant 4 Systems?
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here and here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.
I think that the long term track record of the small caps indexes (globally not just the USA) show that this sector should never be overlooked.
I invest my sons university fund in AAS.L (LSE ticker) and see no reason to change in the near future.
Small companies always have the opportunity to grow faster than their big/mega caps.
It all depends on you attitude to risk when the chips are down.