10 Small-Cap Stocks to Watch

NEW YORK (TheStreet) -- JA Solar Holdings (JASO), Gol Linhas Aereas Inteligentes S.A. (GOL), O2Micro (OIIM), Pampa Energía S.A. (PAM), LDK Solar (LDK), Jinko Solar (JKS), IRSA Inversiones Representaciones (IRS), Banco Macro SA (BMA), ReneSola (SOL), China Ming Yang Wind Power (MY) are expected to return up to 78%, based on their respective 12-month price targets.

Analysts expect these 10 smaller stocks to outperform their peers and broader markets, based on their respective 12-month price targets. These small-caps have an upside potential of 35%-78% with an average upside value of around 49% and average buy ratings of 67%.

These stocks pan sectors such as financials, information technology, solar, utilities, real estate, and airlines.
10. JA Solar Holdings ( JASO) is a China-based manufacturer of high-performance solar power products.

Revenue for 2010 fourth quarter came in at $584.3 million, increasing 137% from $246.5 million registered in the fourth quarter of the prior year. Actual sales recorded for the fourth quarter were consistent with analysts' estimates.

Gross profit increased to $112.2 million from $50.8 million in same quarter of 2009. Gross margin dropped to 19.2% from 20.6% in the earlier year quarter.

Total solar products shipments for 2010 fourth quarter were 463 MW, growing 100% from 231 MW during the same period last year. Based on demand, JA Solar expects total cell and module shipments to surpass 2.2 GW in 2011, or a 50% increase from 2010.

Analysts have buy ratings of 46% and expect the stock to deliver 35% return in the next one year. The stock is trading at 4.9 times its estimated 2011 earnings.

9. Gol Linhas Aereas Inteligentes S.A. ( GOL) is the largest low-cost airline in Latin America.

Net revenue increased 16% in the fourth quarter of 2010 compared to the comparable quarter last year. Higher revenue indicates that the company was able to generate improved yields while maintaining load factor at 70% for the quarter. Fourth quarter earnings before interest, tax, depreciation, amortization, and restructuring margin increased to 25.4% compared to 17.9% in the same period last year.

The company's earnings before interest, tax margin stood at 14%, the highest in the last sixteen quarters. During the first half of 2010, the company concluded its fleet expansion plan and its fleet consists of operating Boeing aircraft. Domestic demand grew 6.9% compared to the comparable fourth quarter of last year, and international demand climbed 8.4% year-over-year in the same period. The stock is trading at 15.1 times its estimated 2011 earnings with an estimated upside of 38%, according to analysts polled by Bloomberg.

8. LDK Solar ( LDK) is a vertically integrated manufacturer of PV products and is the world's largest producer of multicrystalline solar wafers.

Net sales for the fourth quarter of 2010 were $921 million, compared to $305 million during the fourth quarter of fiscal 2009. Net income was $145 million, improving from a net loss of $24.3 million in the year-ago quarter. Gross margin was 27.3%, compared to 9.9% in the same quarter of fiscal 2009.

For full year 2011, LDK Solar guides revenue in the range of $3.5 to $3.7 billion, wafer shipments of 2.7 GW to 2.9 GW, module shipments of 800 MW to 900 MW, and gross margin between 27.0% and 29.0%.

Analysts polled by Bloomberg are positive on the stock and expect it to deliver around 41% return within a year's time.

7. Pampa Energía S.A. ( PAM) is an Argentina based integrated electricity company and along with its subsidiaries participates in the generation, transmission and distribution of electricity,

During the fourth quarter of 2010, consolidated net sales increased to $302 million, up 49.5% for the same period of 2009 on relative better performance of generation and transmission segments of the company.

Consolidated earnings before interest, tax, depreciation, and amortization increased to $32.1 million, an improvement of 10.6% compared to the same period of 2009. Net income came at $8.7 million in the fourth quarter of 2010, compared to a net consolidated loss of $10 million for the same period of 2009.

During the quarter, the company accepted the offer to acquire the assets of AEI in Argentina. Besides, the company intends to take up the offer to acquire the assets of Enron Pipeline Company Argentina. The company is trading at 15.4 times its estimated 2011 earnings and the stock is expected to deliver 44% returns in the next one year.

6. Jinko Solar ( JKS) is a China-based vertically integrated solar power product manufacturer with low-cost operations.

For 2010 fourth quarter, net income was $55.8 million, an increase of 41.9% sequentially and 340% year-over-year. Gross margin was 28.5%, compared to 16.2% for the fourth quarter of 2009. Total revenue stood at $268 million, up 157% year-over-year, exceeding the company's guidance of $210 million to $220 million.

For 2010 fourth quarter, the company's solar product shipments were higher than initially guided at 162.6 megawatts, representing a 20.6% sequential growth and 65.9% year-over-year growth.

Reviewing the business performance, Kangping Chen, JinkoSolar's CEO, said in a press statement, "Our successful IPO and follow-on offering significantly increased our brand awareness and helped us increase our market share, while strengthening our balance sheet and improving our bankability. Our dedicated sales and marketing teams, with new sales offices in Munich and San Francisco, established a number of long-term partnerships with leading global solar companies in Europe and North America while also capturing opportunities in fast-growing markets."

5. O2Micro International ( OIIM) develops and markets power management and e-commerce components for the computer, consumer, industrial, and communications markets.

Revenue for fiscal 2010 rose to $137.8 million compared to $124.3 million in 2009, an increase of 10.9% year-over-year growth. Gross margin was 61.4% in 2010, up 173 basis points compared to 2009.

Revenue for the fourth quarter of 2010 stood at $30.2 million, down 6.8% from the year-ago period. Gross margin was 60.2% in the quarter, a decline of 47 basis points compared to year-ago quarter.

About the business performance, Sterling Du, Chairman and CEO, remarked, "The year began on a high note and slowed down as the inventory correction ran its course. As we enter 2011, the supply chain looks much healthier and our products are well positioned to address both core markets and new areas alike." The stock is trading at 13.6 times its estimated 2011 earnings and analysts expect the stock to return 45% in the next one year.

4. IRSA Inversiones Representaciones ( IRS) is an Argentinean real estate company.

Revenue for the first six months of fiscal year 2011 was 6% higher compared to the same period of 2010 following a 31% increase in the shopping centers segment, which continues to show a positive trend.

Monthly sales per leased square meter by the tenants of shopping centers located in the provinces was 32% higher compared to the first six months of fiscal year 2011 and 74% higher than average monthly sales for fiscal year 2009. The rise in sales was prompted by an increase in ticket volumes and average ticket value.

The EBITDA per revenue for the second quarter of fiscal year 2011 remains steady at 77% and total occupancy of the portfolio remained at above 97%, an indication of the superior quality of their shopping centers. Analysts expect the stock to deliver 51% in the next one year and the stock is trading at 12.8 times its estimated 2011 earnings.

3. ReneSola ( SOL) is a China-based manufacturer of solar wafers and solar module products.

Net revenue during fourth quarter of 2010 rose 7.7% from third quarter of 2010. Net income came in at $61 million against a loss of $28.1 million in the same quarter last year. Actual sales and earnings recorded for the fourth quarter were higher than analysts' estimates.

Regarding the business operations, Julia Xu, ReneSola's CFO, said in a press statement, "Our strategic execution in 2010 generated strong operating cash flows and prudent capital expenditures that have significantly improved our balance sheet. Our net debt-to-equity ratio has been reduced to 33.8% in 2010 from 104.9% in 2009, positioning us well as we look to capture market share through capacity expansions. In addition to record revenues of US$1.2 billion and record shipments of 1.2 GW, we achieved impressive gross and operating margins of 28.9% and 20.4%, respectively, for the full year 2010".

The company managed to secure 20 long-term contracts in 2010, representing about 1.3 GW of expected wafer sales in 2011. Total solar wafer and module shipments for full-year 2010 were at a record 1.18 GW.

Analysts have buy ratings of 83% and expect the stock to deliver 53% return in the next one year. The stock is trading at 4.7 times its estimated 2011 earnings.

2. Banco Macro SA ( BMA) is an Argentina-based financial institution.

For the fourth quarter of 2011, the company's net income was 13% higher than the comparable period in 2009. During the quarter, the return on equity and return on average assets were 27.3% and 3.7%, respectively.

During the quarter, Banco Macro's non-performing to total loans ratio was 2.1% following the recovery process initiated in early 2010. Due to the improvement in the NPL ratio and additional provisions, the non-performing loan coverage reached 147% for the fourth quarter.

The capitalization ratio was 24.7% in fourth quarter, above the minimum threshold. However, the reduction in the capitalization ratio came-off from 26.9% due to higher advances from the bank during the quarter. Net interest margin for the fourth quarter was 11.4%, slightly higher than 11.3% posted in the third quarter of 2011. The stock is trading at 9.3 times its estimated 2011 earnings and analysts expect the stock to deliver 59% return in the next one year.

1. China Ming Yang Wind Power ( MY) is a wind turbine manufacturer in China, focusing on the design, manufacture, and service of wind turbines.

During the fourth quarter, total revenue stood at $260 million, an increase of 15% over third quarter 2010 and 404% over fourth quarter 2009. During the period, wind turbine generators commissioned by the company reached a historical high of 253 units of 379.5 MW, an increase of 6% over third quarter of 2010 and 462% over fourth quarter of 2009.

Gross margin for the fourth quarter was 22.3% compared to 16.7% in the previous quarter and 12.3% in the year-ago quarter. Net income for the period stood at $32.2 million, an increase of 19.7% over the third quarter of 2010. The company incurred a loss in the fourth quarter of 2009.

The stock is trading at 6.5 times its estimated 2011 earnings.

>>To see these stocks in action, visit the 10 Small-Cap Stocks to Watch portfolio on Stockpickr.

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