Almost every major corporation started as a small unit and gradually grew into the giants they are today. Sometimes we look at these giants and wish we had been a part of these companies from the beginning, as the early investors saw their fortunes grow exponentially. Small-cap stocks are some of the most attractive investment options. However, extra care should be given when choosing these stocks, as the majority of small-cap players tend to fail. Nonetheless, there are some stocks which go on to become mega-players, and I believe there are some stocks now on the market that have the capability to become major successes in the future.
Redefining the concept of communication?
8×8, Inc. (NASDAQ:EGHT) markets cloud-based business communications services which enable telephony and video applications as well as web-based conferencing. 8×8, Inc. (NASDAQ:EGHT) has five different product offerings, tailored for different business sizes and needs. With the telephone costs rising, cloud-based services are becoming popular among businesses. The services provided by 8×8, Inc. (NASDAQ:EGHT) allow the businesses to bring down their telephone costs and offer better communication.
The company operates in an extremely attractive market. The market is growing at an exceptional rate, and it is still at the early stages of its growth, therefore, there is a massive opportunity for the company to grow. The competitive advantage of 8×8, Inc. (NASDAQ:EGHT) is its strong patent portfolio. The company has almost 70 patents in its portfolio, which make it one of the biggest patent holders in the market. The company has been innovating in the field of VoIP and cloud-based services; as a result, 8×8, Inc. (NASDAQ:EGHT) currently has a unique advantage over its competitors. The company has deep knowledge of the technology, and it is using its vast knowledge to its advantage.
Over the past six months, the stock has gone up 42%. Average net income growth over the past five years has been over 52% with an operating margin around 11%. The company has no debt, and the average growth in revenues is around 20% over the past three years. Growth in EPS over the past five years has been around 32%, and it is expected to grow at about 29% for the next year.
Solid business model
Inter Parfums, Inc. (NASDAQ:IPAR) manufactures, distributes, and markets a wide range of fragrances and related products in over 100 countries worldwide. The company operates as a partner for a wide range of brands, and its contracts with these brands play an important role in the future revenue streams. The company also relies on expanding its portfolio through brand acquisitions and licensing agreements with other brands. The majority of the sales for the company come from the US and Europe; however, it also has strong presence in the Middle East and South America.
Inter Parfums, Inc. (NASDAQ:IPAR) mainly uses two strategies for growth: First, the company adds to its product portfolio by adding new products via new licenses or acquisitions. Secondly, it introduces new products, targeting established brands and phasing out existing products. In addition to these two strategies, the company has a solid portfolio of brands, which is growing rapidly. By the end of the year, brands like Me by Lanvin and RÊVE from Van Cleef & Arpels will be added to the portfolio. Lanvin will provide the company with an opportunity to penetrate the travel amenities exploiting the premium passenger class.
Furthermore, the company has won the contract for Agent Provocateur fragrances — the company has exclusive rights to manufacture and distribute Agent Provocateur fragrances for the next 10 years. Agent Provocateur is a premium lingerie manufacturer and it has more than 80 stores in 26 countries. The company is looking to grow in Asia, which will bode well for Inter Parfums, Inc. (NASDAQ:IPAR).
Inter Parfums, Inc. (NASDAQ:IPAR) have gone up by about 58% in the past six months. Furthermore, the three-year performance of the company has been extremely impressive with revenue and net income growing at 16.9% and 80.3%, respectively. EPS growth for the company is expected to be 12% over the next five years. In my opinion, Inter Parfums, Inc. (NASDAQ:IPAR) will continue to rise in the near future.
A growing media company
IAC/InterActiveCorp (NASDAQ:IACI) is a media and internet company consisting of more than 150 brands and products. The main segments include Search & Applications, Match, Local, Media, and other. The Search & Applications segment mainly consists of Websites, including Ask.com, About.com and Dictionary.com. The company caters to both business and consumers. IAC/InterActiveCorp (NASDAQ:IACI) is an industry leader and almost half of its revenue comes from Ask.com and About.com. These two provide the company with a solid presence in the market. These are both unique web services and attract a wide range of users. There is still room to grow.
The company has recorded extremely impressive EPS growth (over 48%) in the current year, which is expected to be around 31% over the next five years. There are few companies that can boast such impressive EPS growth figures. As a result, investors have been pouring in and the stock is up over 27% in the past six months. The consensus estimate for the next quarter is $0.83 per share, up from $0.66 per share from a year ago. I expect IAC/InterActiveCorp (NASDAQ:IACI) to continue to grow due to its extremely popular products and growing demand.
Summary
The stocks mentioned in this article have been some of the best-performing stocks in the small-cap segment. The main reasons for these companies to perform well have been the solid business models and attractive product offerings. I believe these three stocks can be solid long-term investments.
The article 3 Small-Cap Picks for Solid Gains originally appeared on Fool.com and is written by Ishtiaq Ahmed.
Ishtiaq Ahmed has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Ishtiaq is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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