Small-cap stocks are public companies that have market capitalizations ranging from $300 million to $2 billion. Since the share prices of these companies can be very volatile, some companies in the small-cap universe, or in small-cap indexes, can have market caps significantly higher than this range at any particular time. Some of the stocks classified as small caps are movie theater chain AMC Entertainment Holdings Inc. (AMC), printing and imaging company Eastman Kodak Co. (KODK), and retail drug store chain Rite Aid Corp. (RAD).
Small-cap stocks, as represented by the Russell 2000 Index, have outperformed the broader market, providing investors with a total return of 41.7% compared to the Russell 1000s total return of 31.8% over the past 12 months. These market performance numbers and the statistics in the tables below are as of Aug. 26, 2021.
Here are the top three small-cap stocks with the best value, fastest growth, and the most momentum. The market valuations of some of the companies listed below are above the generally agreed upper limit of $2 billion for a stock to be considered small cap. This tends to happen in periods of higher volatility, especially for momentum stocks. However, they are still classified as small cap because stocks are not re-indexed as rapidly as their price movement. Their valuations may drop later as volatility subsides.
These are the small-cap stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.
- California Resources Corp.: California Resources is an oil and natural gas exploration and production (E&P) company with operations in California. It produces crude oil, natural gas, and natural gas liquids (NGL). It also operates a power plant that generates electricity from natural gas.
- Home Point Capital Inc.: Home Point Capital is a holding company that, through its subsidiaries, operates as a residential mortgage originator and servicer. It primarily operates through the wholesale channel, working with independent mortgage brokers in order to reach end-borrower customers. The company recently announced financial results for Q2 of its 2021 fiscal year (FY), the three-month period ended June 30, 2021. Home Point Capital reported a net loss of $73.2 million, a significant deterioration from net income of $169.0 million in the year-ago quarter. Revenue plunged 75.5% year over year (YOY). The company said that it faced challenges in its operating environment during the quarter, including significant competitive pressure and volatile capital markets.
- Genworth Financial Inc.: Genworth Financial is an insurance holding company. It is primarily focused on offering mortgage insurance and long-term care insurance for both individuals and groups.
These are the top small-cap stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and their most recent quarterly YOY earnings per share (EPS) growth. Both sales and earnings are critical factors in the success of a company. Therefore ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one or the other figure unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of over 2,500% were excluded as outliers.
- Fulgent Genetics Inc.: Fulgent Genetics is a technology-based genetic testing company. It is focused on improving patient care in oncology, infectious and rare diseases, and reproductive health. The company offers diagnostic testing, genomic sequencing, and other genetic services. Fulgent Genetics announced in early August that it has acquired CSI Laboratories, a provider of cancer diagnostic testing. Financial terms of the transaction were not disclosed.
- Herc Holdings Inc.: Herc Holdings is a full-service equipment rental company. It rents a range of tools and equipment used by the construction and manufacturing industries, including earthmoving equipment, air compressors, trucks and trailers, and more. It also sells used equipment and provides repair and maintenance services. The company recently announced an agreement to acquire CBS Rentals, a full-service general equipment rental company based in Texas. Financial terms of the transaction, which is expected to close by the end of the year, were not disclosed.
- Encore Wire Corp.: Encore Wire manufactures electrical building wire and cable. Its products are used for interior wiring in homes, apartments, and other residential buildings. It also makes wire for use in commercial and industrial buildings.
These are the small-cap stocks that had the highest total return over the last 12 months.
- California Resources Corp.: See above for company description.
- Cassava Sciences Inc.: Cassava Sciences is a clinical-stage biopharmaceutical company focused on developing drugs for the treatment of nervous system disorders, such as Alzheimers disease.
- Ocugen Inc.: Ocugen is a clinical-stage biopharmaceutical company. It is focused on the discovery, development, and commercialization of gene therapies to cure diseases related to blindness. It also is developing a vaccine against COVID-19. The company announced in early August financial results for Q2 FY 2021, the three-month period ended June 30, 2021. Ocugens net loss widened to $26.0 million from $3.6 million in the year-ago quarter. It reported no revenue for the quarter compared to revenue of $43,000 in Q2 FY 2020.
The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.
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