Small Companies 

Four potential small cap bargains

Simon Thompson

Simon Thompson
Four potential small cap bargains

It’s important to distinguish between valuation anomalies and value traps. Some companies are lowly rated for a reason. For instance, if quality of management, pricing power, profit margins, cash flow generation, return on capital and economic value added –  the rate of return (ROR) over a company's cost of capital – are below par, then don’t expect investors to pay a full valuation for a slice of the action.

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