Case Study No. 2 – Never Ignore Fundamental Growth
Oftentimes, we’re told to ignore small cap stocks that are trading at their lows, especially those ignored and left for dead by most analysts.
And while that may be true most times, good research can lead to explosive potential.
Look at EnviroStar (EVI), for example.
It’s one of the most boring, go-nowhere stocks I’ve ever seen. Or, so I thought. The company distributes commercial and industrial laundry and dry cleaning equipment, and steam and hot water boilers in the United States, the Caribbean, and Latin America.
It also supplies replacement parts and accessories; and provides maintenance services. It offers commercial and industrial laundry equipment, including washers and dryers, tunnel systems, and coin-operated machines; finishing equipment, such as sheet feeders, flatwork ironers, automatic sheet folders, and stackers; material handling equipment comprising conveyors and rail systems; mechanical equipment consisting of boilers, hot water/steam systems, and air compressors; and dry cleaning equipment, including garment presses, sorting and storage conveyors, and accessories, according to Yahoo Finance.
That’s as boring as you get. I fell asleep just typing that. However, as boring as the stock may have sounded at the time, at $1.60 a share in 2013, it was the buying opportunity of a lifetime. No one saw the opportunity that would go on to produce a win of nearly 1,500% in four years.
Every $2,500 invested in that stock was now worth $40,000.
How does that happen, though? How does a boring laundry-related stock rocket like that?
It tells you in its fundamentals. Even though the stock was written off, and left for dead, earnings were exploding quietly behind the scenes. Quarterly revenue at the time jumped nearly 30% to $6.44 million year over year. Net income jumped 713%.
Yet, traders ignored it, and all signs of potential explosive growth. It would go on from being a lonely $1.60 stock to $25 a share. Rest assured, traders aren’t ignoring it any longer. Four years after spotting that opportunity, traders are still watching it soar higher.
And the stock is still red hot.
A few days before Amazon’s dramatic surge a mysterious pattern appeared. It was just spotted again with two BIG stocks. Their names are (Continue…)
In fact, in the most recent quarter, it posted revenue of $33.39 million, or 13 cents a share from five cents year year over year. Net income was up to $1.329 million from $379,000 over the same period. Over its six-month period, revenues were up to $42.87 million from $14.86 million. Net jumped to $1.68 million from $536,000. That’s incredible growth.
Again, it proves that paying attention to fundamentals when no one else is could be profitable.