Small cap stocks have been some of the most explosive in April 2018.

In fact, such stocks, as measured by the Russell 2000, are up 5% and have been less impacted by geopolitical tension and trade war fears, as compared to large cap stocks.

Even better, according to analysts at the FTSE Russell:

“With Q1 earnings season off to a strong start, it's worth remembering that small caps have a higher earnings growth outlook than large caps. Wall Street's consensus 12-month forward earnings expectations for the Russell 2000 Index currently stand at 26% versus only 11% for the large cap Russell 1000 Index."

Of the many smaller capped stocks that have benefited in recent months, B.O.S. Better Online Solutions Ltd. (BOSC) has been a standout winner for The Cheap Investor.

After recommending the stock in the November 2017 issue at $1.90, the stock popped to a recent high of $2.97 for a quick win of 56%.

Granted, BOSC isn’t one of the most exciting stocks on the market. It provides radio frequency identification (RFID), mobile, and supply chain solutions in Israel and internationally, but we liked what we uncovered fundamentally.

At the time of the initial recommendation in November 2017, BOSC had a good-looking balance sheet with about $1.8 million (55 cents per share) in cash, a book value of $3.11 per share, and small debt of $3 million.

What we also liked was the fact it was fundamentally improving year over year.

In the second quarter of 2017, the company posted revenue of $6.7 million, a slight improvement over the $6.3 million posted year over year.  Net income of $166,000 was a year over year improvement from the $126,000 posted, as well.

With a sizable cash position, and improving fundamentals, we couldn’t ignore the stock, even though other investors chose to do so.

And it’s a good thing we didn’t.  We would have missed the potential 56% return that those others lost.

By the third quarter of 2017, the company posted revenues of $7.22 million, up from $6.27 million year over year.  Net income also improved from a year-earlier loss of $205,000 to a profit of $132,000.  Over the last nine months, the company posted revenues of $21 million as compared to $20.65 million.  Net income improved from $141,000 to $445,000.

Eyal Cohen, B.O.S.' Co-CEO and CFO, stated, “Since 2010, we have continuously presented an improvement in our annual results. Our financial position is also stronger, with $1.3 million EBITDA for the last twelve months and a net bank debt of $1.1 million. We will announce our outlook for the year 2018 in the first quarter of 2018.”

As we noted in our November 2017 recommendation, if BOSC attained its goal of growing net income from $360,000 to $500,000, the stock had the potential to move at least 25% to 50% over the next year or two.  However, with a recent return of 56%, we’re already ahead of schedule.

As we’ve said for 36+ years, never ignore company fundamentals.