BKEP: 3 Small-Cap Stocks that have High-Growth Potential

The U.S. is at the beginning of a strong macroeconomic recovery, which should shortly be reflected in corporate revenues and earnings. Businesses are increasingly reverting back to contact-intensive activities, made possible by substantial progress on the COVID-19 vaccination front. On March 10, House Democrats passed a $1.9 trillion pandemic rescue package that is expected to give a huge boost to consumer spending. Furthermore, rising bond yields have raised investors’ confidence of a strong U.S. economic comeback.

Economic recoveries usually benefits small-cap stocks because they are more sensitive to consumer spending. A reflection of the gradual economic recovery’s effect on small-cap stocks is evident in iShares Russell 2000 ETF’s (IWM) 46.9% gain over the past six months.

Also, small-cap stocks generally perform well with rising inflation due to a rise in aggregate demand it implies. the annual inflation rate in the U.S. increased to 1.7% in February, up from 1.4% in January. This represents its highest rate since February of 2020.

Against this backdrop, we think it would be wise to bet on small-cap companies Blueknight Energy Partners, L.P. (BKEP), Ocean Bio-Chem, Inc. (OBCI), and Live Ventures Incorporated (LIVE), which possess solid growth attributes.

Blueknight Energy Partners, L.P. (BKEP)

With a market capitalization of $130.63 million, BKEP is a master limited partnership (MLP) company that owns an independent asphalt terminalling network in the U.S. The company provides integrated terminalling solutions for infrastructure and transportation end markets.

Earlier this month, BKEP closed the sale of its crude oil terminalling segment to Enbridge, Inc. (ENB) for$132 million. This should help its transformation to a pure-play infrastructure terminalling business with greater financial flexibility, thereby, reducing the volatility and risk profile of its business, affording it a sharper strategic focus .

BKEP’s total revenues have increased 9.6% year-over-year to $29.81 million in the fourth quarter, ended December 31 Its operating income has risen 11.4% from its year-ago value to $9.46 million, while its EPS has improved 93.9% over the same period.

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BKEP’s EBIT has grown at a CAGR of 21.3% over the past three years. The company’s impressive track record positions it well to emerge as a leading player in the terminalling business.

Analyst expects BKEP’s EPS to grow at a CAGR of 4% over the next five years. The stock has gained 58.3% year-to-date.

BKEP’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

BKEP has a B grade of B for Quality, Momentum, and Growth and an A for Value. Within the B-rated MLPs – Other industry, it is ranked #4 of 12 stocks.

In total, we rate BKEP on eight different levels. Beyond what we stated above, we also have given BKEP grades for Stability, and Sentiment. Get all BKEP’s ratings here.

Click here to check out our Infrastructure Sector Report for 2021

Ocean Bio-Chem, Inc. (OBCI)

OBCI manufactures, markets, and distributes a broad line of appearance and maintenance products for the marine, automotive, power sports, recreational vehicle, and outdoor power equipment markets. The company also produces private label formulations of many of its products for various customers and provides custom blending and packaging services for these and other products.

Last month, OBCI announced that its subsidiary Kinpak Inc. plans to expand its manufacturing and distribution facilities in Montgomery, AL. With both the boating and RV markets taking off, the $5 million expansion plan is expected to be a critical factor in supporting the company’s anticipated business growth in the future.

OBCI reported record fourth quarter net sales for the fifth consecutive year. Its fourth quarter 2020 sales growth was driven primarily by demand in the chlorine dioxide product group of disinfectants and sanitizers, as well as private-labeled products. In addition, the company had a significant increase in its core product groups and its winterizing products and antifreeze sales. Its net sales grew 33% year-over-year to $12.90 million in the quarter, ended December 31, 2020.

OBCI has gained 223.4% over the past three years due to its impressive earnings and revenue growth. The company’s revenue has increased at a CAGR of 11.6% over the past three years, while its EPS rose at a CAGR of 48.9% over that period. The stock has gained 21.2% over the past month.

It is no surprise that OBCI has an overall B rating, which translates to Buy in our POWR Ratings system. OBCI has a B grade for Sentiment and Value, and an A for Growth. It is ranked #3 of 67 stocks in the Consumer Goods industry.

Click here to see the additional POWR Ratings for OBCI (Stability, Momentum, and Quality).

Live Ventures Incorporated (LIVE)

LIVE is a diversified holding company with several wholly owned subsidiaries and a strategic focus on acquiring companies. Through its subsidiaries, the company is engaged in the flooring manufacturing, steel manufacturing, and household appliances and entertainment retail businesses.

In January 21 LIVE its subsidiary, Vintage Stock, fully repaid its $24 million term loan debt to Comvest Credit Partners. The repayment will help the company to reduce its interest costs and place it in a stronger position to deploy cash to other initiatives, such as new acquisitions.

LIVE’s total revenues have increased 49% year-over-year to $62.50 million in its fiscal first quarter, ended December 31 Its operating income has risen 109% from its year-ago value to $7.30 million, while its EPS has improved 1050% to $3.45 over the same period.

LIVE’s revenues have increased at a CAGR of 9.8% over the past three years, while its total assets rose at a CAGR of 13% over that period, underscoring the company’s impressive growth potential. The stock has gained 98.2% year-to-date.

LIVE’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which translates to a Strong Buy in our rating system. LIVE has an A grade for both Value, and Growth. It is currently ranked #3 of 51 stocks in the A-rated Outsourcing – Business Services industry.

Click here to see the additional POWR Ratings for LIVE (Momentum, Quality, Stability, and Sentiment).

The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

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BKEP shares were unchanged in after-hours trading Friday. Year-to-date, BKEP has gained 64.35%, versus a 4.17% rise in the benchmark S&P 500 index during the same period.

About the Author: Rishab Dugar

Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...