In theory, the price of any stock represents the present value of future cash flows. When those cash flows (i.e. earnings per share) are undergoing a contraction, the share price should theoretically decline. Occasionally, a share price will fail to reflect a future rebound in earnings growth that's expected to occur. In such a scenario, the intelligent investor takes notice. He knows that if projections are indicating a future rebound in earnings, then he can expect a future rebound in the stock price as well. He's aware that, in this instance, the further the share price declines today, the larger the percentage gain investors will see tomorrow. Thus, the stock is an obvious buying opportunity.
Let us turn our attention to Manitex International, Inc. (NASDAQ: MNTX), a provider of engineered lifting solutions. The company is currently valued at a market cap just north of $150M. Like many fast-growing small cap stocks, MNTX has seen plenty of volatility in both its earnings and share price.
With full-year EPS expected to contract by 17.5% YOY (from $0.80/sh to $0.66/sh), the stock is trading roughly 38% below its 52-week high. Furthermore, its P/E ratio of 15.6 is in the lower echelon of its long-term range, which would seem to imply a further earnings contraction to occur beyond 2014. Continue reading "Manitex (NASDAQ:MNTX) Looks Primed For Excess Returns"