BOSTON (TheStreet) -- The hedge fund Greenlight Capital, run by David Einhorn, has returned 22% annually, on average, since its 1996 inception, outperforming U.S. stock benchmarks by wide margins. Here are three of Einhorn's favorite small-cap stocks.
Einstein Noah Restaurant Group
owns and franchises bagel shops. During the past three years, it has doubled earnings per share annually, on average. Greenlight Capital owns about 11 million shares, or 65% of the float.
: First-quarter profit tumbled 66% to $620,000, or 3 cents, as revenue inched up to $101 million. The operating margin widened from 3.1% to 4.4%. Einstein holds $11 million of cash and $96 million of debt, equal to a debt-to-equity ratio of 1.3.
: Einstein Noah has advanced 71% during the past year, beating U.S. stock indices. It trades at a price-to-projected-earnings ratio of 14 and a price-to-cash-flow ratio of 5.9, 59% and 54% discounts to peer averages. It's also cheap based on sales.
: Of analysts covering Einstein Noah, five, or 63%, advise purchasing its shares and three recommend holding them.
offers a price target of $17, leaving a potential return of 29%.
expects the stock to hit $15.
is a homebuilder and mortgage banker, specializing in single-family homes, townhouses and condominiums in the Washington, D.C., and Baltimore areas. During the first quarter, Greenlight purchased 55,617 shares, or 0.9% of the float.
: First-quarter profit soared 78% to $32 million, or $5.01, as revenue grew 5.6% to $594 million. The operating margin extended from 6% to 9.3%. NVR has $1.4 billion of cash and $192 million of debt, equal to $1.2 billion of net liquidity.
: NVR has gained 43% during the past year, outperforming U.S. benchmarks. It sells for a price-to-projected-earnings ratio of 15, a 38% discount to the industry average. The shares are costly based on book value, sales and cash flow.
: Of researchers following NVR, two, or 29%, advise purchasing its shares and five suggest holding them.
expects the stock to rise 29% to $880.
predicts NVR will rise to $800.
provides engineering and technical services to power, infrastructure and industrial markets. Since 2007, the company has increased revenue 34% annually. Greenlight cut its position in URS by half during the first quarter, but still owns 2.2% of the float.
: First-quarter profit rose 27% to $96 million, or $1.17, as revenue declined 12% to $2.2 billion. The operating margin tightened from 4.9% to 4.6%. URS has $639 million of cash and $804 million of debt, equal to a debt-to-equity ratio of 0.2.
: URS has fallen 7% during the past year, lagging behind major indices. It trades at a price-to-projected-earnings ratio of 12 and a price-to-book ratio of 1, 49% and 48% discounts to peer averages. It's also cheap based on cash flow.
: Of firms rating URS Corp., 10, or 53%, advocate purchasing its shares, eight recommend holding and one says to hold them.
( FBCM) forecasts that the stock will gain 34% to $60.
( BPSG) expects the shares to hit $58.
-- Reported by Jake Lynch in Boston.