Two Small Caps That Are Ready to Move

05/15/2007 12:00 am EST


Ian Wyatt

Publisher & Chief Investment Strategist, Wyatt Investment Research

Ian Wyatt, editor and publisher of Growth Report, finds an oil and gas company and an Internet financial services firm he thinks will show good gains for investors.

Flotek Industries (AMEX: FTK ), an oil and gas industry supplier, on May 9 announced financial results for its first quarter 2007 ended March 31. 

For the quarter, revenues grew 118% to $35.1 million.  Net income was $3.7 million, or 39 cents per fully diluted share, an increase of 111% from the 19 cents per fully diluted share a year earlier.

Chairman, president and chief executive officer Jerry D. Dumas, Sr. commented: "Across all divisions a strict emphasis remains on lowering costs and increasing revenue per employee."

Flotek delivered an impressive quarter and there appeared to be no signs of any slowdown as with many other firms operating in this sector.  We continue to expect impressive results from the firm.  Since adding shares of Flotek to the Growth Report portfolio at a price of $18.75 on Dec. 8, 2005, shares have increased approximately 140% to the current price of around $44.We maintain our Buy rating and are raising our price target of $35.00 to $50.00, which represents 25x the current year's analysts' earnings estimate calling of $2.00 a share.

Online Resources (NASDAQ: ORCC ), a leading provider of Internet-based financial solutions for small and mid-sized financial institutions, card issuers and billers, on May 8 announced results of its operations for the first quarter 2007 ended March 31, 2006. 

For the quarter, the company reported revenues of $30.8 million, up 85% from the first quarter of 2006. The net loss available to common stock holders in 2006 totaled $9.5 million, or 36 cents per diluted share. This compares with net income of three cents per fully diluted share in the same quarter last year.

The quarter also saw core net loss (a non-GAAP measure the company feels is more representative of performance) of one cent per share, compared with core net income of six cents per share, in the first quarter of 2006. 

Since being added to the Growth Report portfolio in March 2006, shares of Online Resources have lost approximately 16% in value. This quarter's results were certainly promising and as such, we maintain our current Buy rating and price target of $16.00. (The stock closed just above $11 Monday-Editor.)

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