How far do the stones fall? They fall a short distance from where they were thrown.
Do the same with some pebbles and they will move a little, but generally they will stay within expected limits.
Do the same with the sand and you won’t even see where the sand went. It may have flown too far, it may have fallen near your feet, or it may still be flying with the wind.
Small-cap stocks are like that. Smallcaps offer huge growth opportunities but they are notorious for unpredictable returns.
They carry high risk due to high volatility and low liquidity. Hence small-cap stocks can easily convert a multibagger portfolio into a multi beggar portfolio.
Therefore, a smart investor would be good to invest only in Fundamentally Strong Small-Cap Stocks, However, finding such stocks is no joke. It takes a lot of patience and research.
To aid you in your search, we come up with a list of small-cap stocks that have been leading and laggards over the past year.
Read on to find out…
top five leaders
#1 Cressanda Solutions
Cresanda Solutions provides Software Services, Digital Media Services and Information Technology (IT) Enabled Services. Its software services include onsite-offshore development of various business applications, IT consulting, and offshore application development, maintenance, testing, and migration services.
It also provides enterprise application integration, data warehousing, enterprise architecture, application development, enterprise portals, knowledge management and project management.
Cressanda Solutions has given a multibagger return of 1,171% in the last one year.
However, the company has not always been a star performer. From 2015 to 2021, the share price was in a comma and went nowhere. It didn’t move an inch but in 2021 the graph changed.
At a time when most IT stocks were falling, Cressanda Solutions turned into a multibagger.
The change in share price may have been driven by the revival of its business, as it finally posted profitable quarterly results in December 2021. However, no concrete reason can be given for the sudden increase.
In May 2022, the company entered into an agreement with a large institutional client to provide technology-driven infrastructure solutions for seamless passenger experience in India.
#2 Mirza International
Next on the list is Mirza International.
Mirza International was incorporated on 5 September 1979 with a small leather factory for manufacturing finished leather at Magarwara near Kanpur. The company founded by Irshad Mirza and Rashid Mirza was then called Mirza Tanners.
Today, the company has emerged as a leader in the manufacturing and marketing of leather and leather footwear.
The share price of Mirza International was limited to mid-2021. Since then the share price has been steadily rising. The share price has risen 391% on a year-on-year basis.
In fact, it has given positive returns every month for the financial year 2022-23.
However, it should be noted that in the present circumstances it is overvalued based on estimates of intrinsic value.
#3 Choice International
Choice International is one of India’s leading financial services group not only in India but for the entire world. It has been in the industry since 1993 and today it has expanded into a finance company for a large section of individuals as well as institutions.
The stock price rose last year after trading in a range bound manner. Choice International’s share price rose 335% on a year-over-year basis.
On 17 October 2022, the company announced its quarterly financial statements. The company’s profit margin declined to 11.1% from 19.2% on a year-on-year basis.
#4 Jyothi Resins and Adhesives
Jyothi Resins & Adhesives is engaged in manufacturing of Synthetic Wood Adhesives under its brand name Euro7000, which was launched in 2006. It is now the second best selling wood adhesive brand in India in the retail segment.
Indian chemical sector got a boon in disguise as china plus one strategy, It also got an opportunity in Contract Research and Manufacturing Services (CRAMS). Import substitution also helped in the growth of the Indian chemical stock.
One of the stocks that benefited from these tailwinds was Jyothi Resins and Adhesives. After remaining stable for a long period of time, the company’s stock price rocketed near Diwali. Its share price rose 323% on a year-over-year basis.
Five years ago, a stock that traded around the price range 20, is now trading at a price of 1,274.2. The share price has risen more than 6,200% in the last five years.
The financial quarterly performance of Jyothi Resins has been improving. Net profit margin and sales have all shown sequential growth on YoY and QoQ basis.
The company became the talk of the town as soon as the bonus was announced. On 17 May 2022, it announced 2:1 bonus shares and 75% final dividend for the financial year ending March 2022.
#5 Automotive Stamping and Assembly
Automotive Stampings and assemblies is a Tata group company. The company is engaged in the business of manufacturing Sheet Metal Stamping Welded Assemblies and Modules for the automotive industry.
Their four manufacturing facilities are located at Bhosari (Maharashtra), Chakan (Maharashtra), Halol (Gujarat) and Pantnagar (Uttarakhand). It manufactures sheet metal components, welded assemblies and modules for automobiles.
Automotive Stampings has delivered a multibagger return of 310 per cent on a year-on-year basis.
The financial performance of the company is weak. In the last financial year itself, the company had posted profitable financial results before running into losses. For the quarter ended June 2022 also, the company reported a net profit of 7m, which is less.
Gainers done and dusted off, let’s move backwards.
top five laggards
#1 Future Retail
Future Retail is an India-based company engaged in the business of retailing a range of household and consumer products through departmental store facilities under various formats. The company is primarily engaged in the business of multi-brand retail trading.
Murphy’s law states that, Whatever can go wrong will go wrong.
This is absolutely true of the Kishore Biyani-led Future Group. High debt and too much diversification are some of the reasons for the downfall of its Future Group.
Future Retail Group was the main player. However, the company was in trouble when earlier this year, Reliance took charge of 835 stores in Future Retail’s stores on an account of non-payment of lease rentals.
The company was in further trouble when 69 percent of Future Retail’s secured creditors in April 2022 rejected the proposed deal in August 202.
In August 2020, Reliance Retail agreed to buy the wholesale, retail and logistics businesses of Future Group 247.1 billion
Bank of India has already filed insolvency petition against the company. No wonder the share price fell 94% in the past year.
In fact, two more shares of Future Group have made a place in the list of two backward. On a year-on-year basis, Future Lifestyle Fashions’ share price is down 87 per cent while that of Future Consumer is down 76 per cent.
#2 Harmony Engineering
Sadbhav Engineering is an Indian civil engineering and construction company headquartered in Ahmedabad, Gujarat.
It was established in 1988 by Shri Vishnubhai M. Patel and the company has implemented projects in construction of roads and highways, bridges, mining and irrigation allied infrastructure etc.
The company worked for clients including NHAI, DMRC, Sardar Sarovar Narmada Nigam, Coal India, L&T, HCC, Punj Lloyd, and many more.
On a year-over-year basis, the share price is down a whopping 74%. The decline in share price is due to poor financial performance.
For the financial year 2021-22, the consolidated net loss of Sadbhav Engineering widens to to 7.3 billion 2.4 billion reported in the last year. Company’s consolidated revenue from operations also fell 15% to 19.1 billion 22.4 billion in the previous year.
The operations of the group were affected during FY 2012 due to inflationary pressures and lack of resources. Further, this was also on account of slow order execution, which has increased due to higher working capital lock-up and non-availability of additional banking limits.
In fact, we had highlighted in an editorial that Harmony Engineering is one of them. Penny stocks that can go bust.
#3 Dhani Services
Dhani Services provides consumer business that operates through its application “Dhani”. The company offers digital healthcare and transactional finance.
The company was founded by Sameer Gehlot in 1995 as Indiabulls Ventures Limited, which was later renamed Dhani Services Limited in October 2020 under a brand name to accommodate the consumer business of Indiabulls Group.
On a year-on-year basis, the share price of Dhani Services fell 40%. The heavy downpour began with a headline that read “Hundreds of PAN identity theft on Dhani App”,
Several users of the app had expressed concern on Twitter that their personal financial information was being misused by unknown third parties to avail loans on the app.
#4 Solara Active Pharma Sciences
Solara Active Pharma Sciences is a customer-oriented API firm. It has a legacy of over three decades and is derived from the API expertise of Strides and the technical know-how of the human API business from Sequent Scientific.
On a year-over-year basis, the share price fell about 66%. The decline in share price can be attributed to poor financial performance.
The third quarter of fiscal year 2022 was a challenging quarter for Solara Active Pharma Sciences as the company took a major decision to reset its commercial business strategy. Solara transitioned from a distribution-led to commercial model for direct sales to customers in less regulated markets.
#5 Zelpmock Design and Tech
Xelpmoc Design and Tech provides information technology services. The company provides platform development, testing, deployment, maintenance, data science and other related services.
It is a technology, data analysis and design company focused on solving real problems affecting people at large.
On a year-over-year basis, the share price fell about 66%. The decline in share price is due to poor financial performance.
Xelpmoc Design and Tech reports net loss 39.4m in the quarter ended June 2022, while there was a net loss of 15.3m during the previous quarter ended June 2021.
Sales down 1.2%. happened 32.1m as compared to the quarter ended June 2022 3.3m during the previous quarter ended June 2021.
Another reason behind the fall is the sell-off in global tech stocks, which has also sent Indian IT companies in the dumps.
investment takeaway
Small-cap stocks can be fortune makers or fortune breakers. The high volatility of small-cap stocks makes them attractive and risky at the same time.
Many blue-chip stocks were once smallcaps. But not all small-cap stocks will become the bluechips of the future. A rally in small-cap stocks looks attractive, but you have to be careful as some of these rallies are just news based.
Think of the smallcap as a fast car. It has to be seen whether the car has enough fuel and good roads. Otherwise, the car will either have an accident or it will stop in the middle of the way. Like Future Group mentioned above, it ran out of fuel to pay off its debt.
Therefore, investing in small-cap stocks is an art that can be mastered only with an understanding of the fundamentals and growth potential of a company.
Disclaimer: This article is for informational purposes only. This is not a stock recommendation and should not be treated as such.
This article is syndicated from equitymaster.com
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