Although at a slower speed compared to 2019, mainly due to the impact of the new coronavirus outbreak, forecasters estimate the U.S. gross domestic product will continue to expand in 2020, growing by 1.70%.
Consumer spending (the largest component of the GDP) will drive the expansion as it is expected to hit $13.734 trillion before the first quarter of 2021, up approximately 2.4% from $13.41 trillion reported for the final quarter of 2019.
Greater consumer spending should ideally correspond to higher net earnings, which, serving as an essential catalyst, will help the U.S.-listed equities to rebound faster as soon as the current market turmoil due to the coronavirus disappears.
The U.S. small caps usually grow strongly when they catch a tailwind. These stocks have a market capitalization of $300 million to $2 billion. Among small caps, a recent positive turnaround in the bottom line positions the following stocks particularly well.
Fresh Del Monte
The first company to consider is Fresh Del Monte Produce Inc. (FDP, Financial), a Cayman Islands-based producer, marketer and distributor of fresh and fresh-cut fruits and vegetables worldwide with a market capitalization of around $1.36 billion.
Fresh Del Monte shifted its trailing 12-month earnings per share without non-recurring items to a net profit of $1.37 in 2019 from a loss of 45 cents in 2018. The stock was trading at a price of $28.4 per share on Friday, below the 200-, 100- and 50-day simple moving average lines.
GuruFocus assigned the company a moderate financial strength rating of 5 out of 10 and a positive profitability rating of 6 out of 10.
The stock has a price-earnings ratio of 20.85 versus the industry median of 18.3 and a price-sales ratio of 0.31 versus the industry median of 0.84.
Wall Street sell-side analysts forecast the company’s annual earnings will grow by 26.7% this year and by 5% every year over the following five years. One analyst issued a buy rating for this stock and has set a target price of $40 per share.
Fresh Del Monte will pay a quarterly cash dividend of 10 cents per common share on March 27, producing a forward dividend yield of 0.85% as of Friday.
BrightView Holdings
The second company to consider is BrightView Holdings Inc. (BV, Financial), a Blue Bell, Pennsylvania-based provider of commercial landscaping services with a market capitalization of about $1.47 billion.
BrightView switched its trailing 12-month earnings per share without non-recurring items to a net profit of 43 cents in 2019 from a loss of 14 cents in 2018. The shares were trading at $14.04 at close on Friday, below the 200-, 100- and 50-day simple moving average lines.
GuruFocus assigned the company a moderate financial strength rating of 4 out of 10, but a low profitability rating of 2 out of 10.
The stock has a price-earnings ratio of 36.02 versus the industry median of 15.65 and a price-sales ratio of 0.59 versus the industry median of 0.93.
Wall Street sell-side analysts forecast the company’s annual earnings will grow by 10.5% this year and by 23.76% every year over the following five years.
As of March, four Wall Street sell-side analysts recommend a strong buy, five analysts recommend a buy and one analyst recommends a hold rating for this stock. The average target price is $19.63 per share.
Currently, BrightView doesn’t pay dividends.
Arcadis
The third company to consider is Arcadis NV (ARCAY, Financial), a Dutch designer and consultant company for natural and built assets worldwide with a market capitalization of about $1.77 billion.
Arcadis shifted its trailing 12-month earnings per share without non-recurring items to a net profit of 15.64 cents in 2019 from a loss of 35.46 cents in 2018. The stock was trading at $22.65 at close on Friday, below the 50-day simple moving average line but still above the 200- and 100-day lines.
GuruFocus assigned a moderate rating of 5 out of 10 for the company’s financial strength and a very positive profitability rating of 7 out of 10.
The stock has a price-earnings ratio of 150.08 versus the industry median of 11.98 and a price-sales ratio of 0.5 versus the industry median of 0.55.
Sell-side analysts have issued an overweight recommendation rating for this stock and an average price target of $23.15 per share.
Arcadis paid an annual dividend of 52.7 cents per common share on May 20, producing a forward dividend yield of 2.33% as of Friday.
Disclosure: I have no positions in any securities mentioned.
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