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Here's Why Strong Buy KEMET Corporation Stock Soared Today

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Shares of Kemet Corporation (KEM - Free Report) , a Zacks Rank #1 (Strong Buy), soared nearly 8% on Wednesday after S&P Dow Jones Indices announced that it was adding the capacitor manufacturer to the S&P SmallCap 600 index.

According to S&P, Kemet will be replacing Astoria Financial (AF) in the index "prior to the open of trading on Monday, October 2." KEM is moving higher thanks to increased demand from index funds that track the S&P SmallCap 600.

As the name implies, the index tracks small-cap companies. To be eligible for inclusion in the index, a company must be based in the U.S. and have a market cap of $450 million to $2.1 billion.

Astoria Financial, which has soared more than 42% over the past 52 weeks, is now too large for the index. KEM has skyrocketed more than 450% over that same timeframe and now holds a market cap of roughly $1 billion.

Kemet is the world's largest manufacturer of solid tantalum capacitors and one of the world's largest manufacturer of multilayer ceramic capacitors. These are two of the fastest-growing sectors of the U.S. capacitor industry.

On top of its strong Zacks Rank, the stock is also sporting an “A” grade for Value, as well as an overall VGM grade of “A.” Even with its share price explosion, the company still holds a P/E ratio of just 12.13 and a P/S ratio of 1.10.

Based on our current consensus estimates, we expect Kemet to record EPS growth of 264% and sales growth of 53% this fiscal year. Nevertheless, today’s gains are a result of S&P SmallCap 600 index funds starting to buy up shares and are therefore not indicative of a change in the company’s fundamental picture.

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